Press Release No. 08/324

Press Release: Statement by the IMF Mission in Bulgaria

December 15, 2008

An International Monetary Fund (IMF) mission visited Sofia during December 4-15 to conduct the annual Article IV consultation with Bulgaria.

The mission issued the following statement at the conclusion of the visit today:

"Data for the first three quarters of 2008 show that the economy continued to perform well through end-September.

"But the world economy is slowing and this will have two effects on Bulgaria: lower foreign demand and a drop in capital inflows, which have been an important source of growth so far. Indeed, there are preliminary signs of an economic deceleration in Bulgaria in the fourth quarter, and the IMF mission's outlook for 2009 if for GDP growth to slow further to about 2 percent. With slower growth the current account deficit is projected to decline from 24 to 15 percent of GDP in 2009. Inflation is expected to fall to 4½ percent at end-2009, helped by a sharp drop in global commodity prices.

"Fortunately, Bulgaria starts from a strong position to deal with the challenges ahead. The public finances are in good shape, with one of the highest fiscal surpluses in Europe. In addition, the balance sheets of the central bank and the government are strong, with large foreign reserves and substantial buffers accumulated in the fiscal reserve account.

"In a difficult external environment, it will be essential that public policy is focused on maintaining public trust, and continue the strong policies of recent years. Fiscal surpluses remain an important support for the currency board, and also essential to preserve balances in the fiscal reserve account — a necessary shield if problems were to emerge.

"It will also be important that wages that have been growing rapidly slow, as a continuation of recent trends could affect competitiveness."