Bulgaria’s current account deficit hits record high
SOFIA – Bulgaria’s current account deficit swelled to a record high at the end of November, the central bank said yesterday, as the EU aspirant’s economy continued to overheat. The deficit jumped to 2.681 billion euros, or 12.7 percent of gross domestic product, from January to November 2005, up from 1.292 billion euros, or 6.6 percent, over the same period in 2004. The gap for November alone was 466.3 million euros, compared with a 373.6-million-euro deficit in the same period in 2004, the bank said. The IMF warned last week the shortfall looked set to hit 14 percent of GDP for all of 2005, well over original forecasts. It said for the first time since Bulgaria recovered from a 1997 economic crisis that its economy was overheating and it urged the Socialist-led government to tighten a fiscal policy that is already one of the strictest in Europe. The ballooning current account gap has been fueled by a boom in consumer lending with banks pouring cash into the pockets of Bulgarians, many of whom are experiencing the ability to buy big-ticket, foreign-made items for the first time. Cumulative imports rose by 27.1 percent on an annual basis through November, while exports rose 18.2 percent. The trade balance, which makes up most of the external deficit, widened by 54 percent on an annual basis to 3.65 billion euros. Analysts said wage bonuses in some public jobs and holiday shopping will have further boosted imports in December, pushing the end-2005 current account gap figure above the IMF’s and government’s forecasts. «A current account gap of 14.5 percent of GDP would not be a surprise after the growing imports we witnessed over all of last year,» said Dimitar Chobanov, an analyst at the Institute for Market Economics. «The same development will continue this year as well. The deficit will definitely exceed the government’s forecast of 12 percent, but will probably remain below 14 percent.» The IMF has said the best way for Sofia to cool the deficit is to end both 2005 and 2006 with a surplus of 3 percent of GDP, but the government has rejected the plan. The Finance Ministry is aiming for surpluses of 2 percent of GDP for both years, although analysts say a record end-November budget surplus of 1.78 billion euros puts the Fund’s 2005 recommended level in reach. Foreign direct investment was 1.5 billion euros in the period between January and November, accounting for 56.3 percent of the total current account deficit.
