ECONOMY

Bulgarian economic growth seen as gaining ground in Q4 2007

SOFIA (Bloomberg) – Bulgaria’s economic growth probably accelerated in the fourth quarter of 2007, following a slowdown in the previous three months, driven by industry, services and consumption in the first year of European Union membership. The expansion accelerated to an annual 5.9 percent, compared with a rate of 4.5 percent in the third quarter, according to the median estimate of nine economists surveyed by Bloomberg. The report is due to be released by the Sofia-based statistics institute on Monday. Bulgaria, the EU’s poorest member whose per capita gross domestic product is 37 percent of the EU average, is counting on investment and accelerating growth to help raise living standards in the former communist country. Food imports and high global grain and oil prices fueled a widening trade deficit, offsetting investment-driven economic growth in the third quarter. «Industry and services will have the strongest growth in the fourth quarter, helping the economy recover,» Latchezar Bogdanov, managing partner at Industry Watch LLC in Sofia, said in an e-mail. «Agriculture contributed to a lesser share of GDP in the fourth quarter and its decline will have a smaller impact on overall growth.» Industry and services are expected to grow at around 10 percent in the last quarter, Bogdanov said, after rising 12.8 percent and 11 percent respectively in the previous three months, according to statistics office data. Year-end bonus payments and increased government spending on road construction and other public service projects will boost consumption-driven growth, said Ivailo Vesselinov, a senior economist at Dresdner Kleinwort in London. A 43 percent slump in agricultural output eroded third-quarter growth, after a drought followed by rainstorms destroyed vast areas of crops in the summer. Most of the EU’s eastern members’ economies are expanding at faster rates than those in the 15-member euro region. The euro area, where 65 percent of Bulgarian goods are sold, grew 2.2 percent in the fourth quarter. Bulgaria’s nine-month economic growth was 5.7 percent. The economy grew 6.1 percent in 2006 and 6.2 percent in 2005. Record levels of foreign direct investment have helped sustain expansion of about 6 percent since 2004. A corporate tax rate cut to 10 percent last year helped lure record levels of 5.7 billion euros in foreign investment last year, central bank data showed. About 60 percent of that amount went into real estate, fueling a construction boom for a third year, while some Western companies moved factories to take advantage of cheap labor. Montupe SA, a French car parts maker, and Melexis NV, a Belgian maker of electronics that supplies car sensors to General Motors Corp, Ford Motor Co and Daimler AG set up factories in Bulgaria last year. A three-year government plan envisages annual growth exceeding 6 percent in 2008, 2009 and 2010.