Bulgaria Economy to Shrink 5% in 2009

Bulgaria’s economy will shrink by five per cent this year, London-based research firm Capital Economics suggests, as quoted by the Bloomberg news agency.

In one of the bleakest forecasts about the Bulgarian economy since the outbreak of the global financial crisis, Capital Economics said exports and inbound investment flows will collapse, shrinking the money supply and forcing the Government to drain fiscal reserves to restore liquidity.

This move would buy the Cabinet about a year but then the reserves will be exhausted and force the country to line up for help at the door of the International Monetary Fund, IMF.

The IMF last week forecast a slowdown of three per cent for the Bulgarian economy in its worst-case scenario.

Capital Economics said Eastern Europe’s gross domestic product would decline by six per cent on average this year, with a record 15 per cent expected in Latvia and Lithuania. Poland, the region’s largest economy, is seen shrinking by three per cent despite the optimistic forecast of its government.

“The entire region is likely to enter recession this year, with little prospect of a swift recovery,” the research firm’s economists Roger Bootle, Jonathan Loynes and Neil Shearing said.

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