ECONOMY

Bulgaria’s external deficit up

SOFIA (Reuters) – Bulgaria’s current and capital account gap widened to -2.57 billion or 9.6 percent of gross domestic product in the first five months of this year, driven by booming imports, central bank data showed yesterday. The shortfall, the main economic worry for the new European Union entrant, was -1.68 billion and 6.7 percent of GDP in the same period a year ago, the bank said in a statement. Adopting EU statistics standards, the bank gave figures for a combined current and capital account deficit which includes capital spending funds from the EU, because these were part of the current account balance prior to EU entry in January and are needed for comparisons with prior periods, a bank official said. The current account deficit alone was -2.59 billion in the January-May period, while the capital account showed a surplus of -22.7 million in the first five months. Foreign direct investment was -1.5 billion, covering 59.1 percent of the gap, down from -1.7 billion a year earlier when it covered 96.8 percent. The current and capital account shortfall for May alone was -441 million compared with -265 million in May of 2006. Bulgaria ended last year with a record gap of 15.8 percent of GDP and the Finance Ministry sees it expanding up to 18 percent this year. The trade gap, the main reason for the huge imbalance, was -2.66 billion in the first five months of this year. Cumulative imports outpaced exports, rising by 17 percent to -7.63 billion. Exports grew by 6.7 percent to -4.96 billion. The Balkan country operates under a currency board regime that significantly limits the central bank’s powers, so fiscal policy is one of the main tools for protecting the economy from external shocks. Sofia targets a budget surplus of at least 2.3 percent this year.