Tourism helps Bulgaria stay well below projected C/A deficit target

SOFIA (Reuters) – A strong tourism season helped shrink EU candidate Bulgaria’s January-October current account gap by almost a fifth on an annual basis to 764.8 million euros, data showed yesterday. The shortfall grew slightly from end-September to 3.9 percent of GDP, but it was still well below the government’s end-year target of 7.7 percent, the central bank said in a statement. The external gap for October alone was 209.4 million euros, versus a 208.1 million gap in October of last year, while the cumulative 10-month result was 949.3 million in 2003. The trade deficit, the most important component of the balance of payments, deteriorated by 386.6 million euros on the year to 2.0 billion euros, or 10.3 percent of GDP, through end-October. Cumulative imports for the January-October period continued to expand quickly, rising 18.4 percent. Exports showed slower, but still robust, growth of 16.8 percent year-on-year. But the trade shortfall was partially compensated by strong showing in the Balkan state’s tourism-driven service sector, where the surplus grew to 811.3 million euros to end-October, versus 595.7 million in the same period on 2003. Foreign direct investment over the period reached 1.21 billion euros. The government expects that to rise to 2.5 billion by end-2004. Bulgaria’s current account is crucial to its currency board regime that keeps its lev pegged to the euro and obligates the government to maintain tight fiscal restraint and ensure the external shortfall is covered by incoming funds.