Bulgarian Current Account Deficit Went Over 1billion Eur Just In 2 Months

Bulgaria's current account deficit was 1.29 billion EUR ($2.04 billion) or 3.9 percent of annual GDP at the end of February, compared with 1.11 billion EUR and 3.9 percent of GDP a year ago, data showed on Tuesday.

The Socialist-led government sees the external shortfall rising to 22 percent of gross domestic product this year, after it hit 21.5 percent in 2007 due to strong imports of both consumer and industry goods.

Exports rose 30.7 percent to 2.3 billion EUR, while imports rose 24.7 percent to 3.5 billion EUR, the central bank data showed.

Rampant domestic consumption is the key driver of the deficit, as Bulgarian rush to buy after decades of austerity under communism, while companies import machinery and other investment goods to expand production.

The bloated gap makes the emerging economy vulnerable to a hard landing, especially if foreign direct investment (FDI), which offsets it, slows due to tighter global liquidity, analysts say.

FDI was 432 million EUR in the first two months, up from 375 million euros in January-February of 2007, and covered 33.7 percent of the current account gap.

Bulgaria leads one of the tightest fiscal policies in the European Union and plans a budget surplus of at least 3.0 percent of GDP this year to counter external risks arising from the deficit.

Sofia operates under a currency board regime which curtails central bank operations and makes fiscal policy its key tool to influence the economy. international.ibox.bg