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Economic developments and perspectives Petar Chobanov EXECUTIVE DIRECTOR AGENCY FOR ECONOMIC ANALYSIS AND FORECASTING 200 7 – ECONOMIC INDICATORS High and sustainable economic growth of around 6% Adequate budget balance and falling government debt

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economic developments and perspectives

Economic developments and perspectives

Petar Chobanov

EXECUTIVE DIRECTOR

AGENCY FOR ECONOMIC ANALYSIS AND FORECASTING

200 7 economic indicators
2007 – ECONOMIC INDICATORS
  • High and sustainable economic growth of around 6%
  • Adequate budget balance and falling government debt
  • Inflation - influenced by external and internal shocks
  • Lowering unemployment and rising economic activity of the labor force
  • FDI cover the current account deficit
economic growth
ECONOMIC GROWTH

Source: NSI, AEAF, Eurostat

  • Stable and sustainably high economic growth
  • Higher than EU average growth
government budget and debt
GOVERNMENT BUDGET AND DEBT

Source: MoF

  • Main objectives of the fiscal policy
  • Adequately addresses the imbalances in the economy
  • Meets the rules of the Stability and Growth Pact
  • Considerable reduction of government debt
inflation
INFLATION
  • Substantial rising of international oil and food prices
  • Unfavorable weather conditions and results in the agricultural sector
  • Convergence process of price and income levels
  • Changes in administrative prices
  • Weakening impact of the rising of excise duty rates

Source: MoF

labor market
LABOR MARKET

Unemployment (%)

Employment

  • Stable economic growth
  • Employment rose by 4.6%
  • Unemployment dropped strongly to 6.9%.
income and labor productivity
INCOME AND LABOR PRODUCTIVITY

* GDP in fixed prices per employed (NAS)

  • Labor productivity growth accelerated to 3.3% in real terms in 2007
  • Average salary in 2007 rose by 19.7 and 10.4% in nominal and real terms
  • Share of compensation of employees lags considerably behind this indicator for EU-25
current account deficit and fdi
CURRENT ACCOUNT DEFICIT AND FDI
  • In 2007 the current account deficit reached 21.5% of GDP
  • FDI cover 98% of the deficit according to preliminary data
  • The foreign currency reserves continue to grow sustainably

Source: BNB, AEAF

incentives to invest in bulgaria
INCENTIVES TO INVEST IN BULGARIA
  • Favorable business climate
  • Favorable tax environment
  • Equal tax treatment of local and foreign investors
  • Investment credit rating
  • Good technical skills of labor force
  • Comparatively low operational costs
  • Support for the building of infrastructure to large investment projects
  • Consistent efforts to improve the business environment
financial system
FINANCIAL SYSTEM
  • Adequate increase in FX reserves
  • High level of credit activities with good quality of Commercial Banks’ portfolios
  • Sustainable growth of deposit base
  • Greater role of non-banking financial institutions
  • High degree of coordination of policies
  • Effective regulation of the financial system
increase in fx reserves
INCREASE IN FX RESERVES
  • Sustainably high growth of FX reserves
  • High level of coverage of monetary base and supply

Source: BNB, AEAF

credit activity of banks
CREDIT ACTIVITY OF BANKS

Household Credits

Corporate Credits

  • Increase of credits for the private sector
  • Retention of good quality of credit portfolio
  • Pressure on interest rates due to great competition in the banking sector

Source: BNB, AEAF

Source: BNB, AEAF

economic policy
ECONOMIC POLICY...
  • Maintenance of the Currency Board Arrangement with the current rate of exchange 1 EUR = 1.95583BGNuntil the country joins the Euro area
  • Maintenance of rigid fiscal discipline
  • More active labor supply, better labor market flexibility
  • Public sector wage growth will not be ahead of labor productivity
  • Coordination between the Government and the Central Bank when making commitments concerning the medium-term economic policy
  • Careful monitoring of risks in the economy and timely reaction, where needed
and prospects for development
... AND PROSPECTS FOR DEVELOPMENT
  • Maintenance of a sustainable and high growth
  • Increase of capital in the economy resulting from internal investment demand, sustainable inflows of FDI and absorption of EU funds
  • Sustainable low level of unemployment and gradual increase of employment and economic activity
  • Stable increase in real income and well-being
  • Deepening of financial intermediation while preserving the system’s stability
thank you

THANK YOU!

Petar Chobanov

EXECUTIVE DIRECTOR

AGENCY FOR ECONOMIC ANALYSIS AND FORECASTING