Nov. 2, 2010 -
PRLog -- As one of the last economies in emerging Europe to enter recession, Bulgaria will also be one of the last to exit the downturn, with further negative growth on the way in 2010. Even though we expect a return to positive growth in 2011, we nonetheless stress that private sector deleveraging, limited scope for fiscal expansion and weaker external demand will prevent economic growth returning to the 6% range seen at the peak of the previous cycle. Moreover, given that the government has backtracked on several major policies, we warn that the potential for fiscal slippage and an inability to push ahead with much-needed reforms pose a risk to economic stability over the medium term. Bulgaria's potential role in hosting part of the US-proposed missile defence shield in Europe, coupled with the government's commitment to the EU-led Nabucco pipeline, will keep relations with Moscow tense. Though official talks with the US over the missile defence shield have allegedly not taken place, Prime Minister Boyko Borissov has indicated that preliminary discussions would take place. While the administration's tougher stance towards Russia may boost the popularity of the prime minister and his Citizens for European Development of Bulgaria (GERB) party, there is a risk of a significant deterioration in diplomatic and trade relations. With the economy still mired in recession, external debt edging up to more than 110% of GDP and the Greek fiscal crisis threatening to raise borrowing costs, we warn that domestic debtors face elevated refinancing risks. A major credit event is still a risk to our core scenario for the time being, though we warn that fears over sovereign debts across the eurozone will continue to mount, which in turn will exert continued pressure on Bulgaria's private sector to undergo a painful and prolonged period of deleveraging. Though the Bulgarian banking sector continued to expand during the first two months of 2010, we hold to our view that the industry will shrink this year as deleveraging and rising non-performing loans force asset write-downs. Moreover, we expect weak corporate profitability and high unemployment to weigh on demand for new loans. As such, not only will banks be less able to extend new credit, but demand for additional loans will similarly be weaker. While our core scenario calls for a fairly smooth balance sheet adjustment, with assets as a percentage of GDP projected to reach 106% by 2014 from 112% in 2009, we highlight the ongoing risks posed by Greece's fiscal and economic crisis. A major liquidity crunch in the Greek banking sector would provide serious cause for concern in Bulgaria, where around a quarter of foreign lending comes from banks in Greece.
For more information or to purchase this report, go to:
-
http://www.fastmr.com/prod/90339_bulgaria_business_foreca...About Business Monitor International
Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at
http://www.fastmr.com/catalog/publishers.aspx?pubid=1010About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
For more information about these or related research reports, please visit our website at
http://www.fastmr.com or call us at 1.800.844.8156.
# # #
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.