Informes Sectoriales OP - Icex

TOURISM AND RELATED SERVICES IN BULGARIA
During the first half of 2005, the Bulgarian economy continued developing at high
rates. For the first six months GDP increased by 6.2% in real terms, and its nominal
value reached EUR 9.4 billion. This is the highest growth rate of the physical volume
of the indicator for the first half of the year for the last seven years and it creates a
good basis for the realization of an annual growth rate of about 5.7% in 2005. For
the period 2006 - 2008 the Agency for Economic Analysis and Forecasting expects
that the positive development of the Bulgarian economy will be maintained, with
forecasted growth rates of about 5.7-5.9% annually. The factors underlying the forecasts
are the dynamic exports developments and the increasing volume of investments
in the economy.
Both the recent political stability of Bulgaria and its prospective accession to the EU
have underpinned strong recent growth. One of the key factors driving this has been
a credit driven boom which has accelerated since the privatization of the banking
sector. Inflation has increased as a result but it remains in single digits and below
the regional average. Inflation is forecast to fall back to around 4% this year.
One area of obvious risk, however, is that if domestic demand grows at a stronger
than expected rate, then a more strict fiscal and monetary policy will be required to
avoid deterioration in the deficit. Otherwise the sustainability of the currency board
might be jeopardized.
Bulgaria has a lower level of GDP per capita than the average for the last wave of accession
countries, although this is balanced to some extent by a lower than average
level of living costs. In nominal terms for example, Bulgarian GDP (in 2003) stood at
39% of the level of the last EU accession countries. In terms of GDP at Purchasing
Power Parity (PPP), which takes account of differences in living costs, Bulgarian GDP
is however 60% of the average of the last accession countries.
Private consumption per head has risen rapidly since 1999 as income growth has recovered
and real wage growth is expected to increase further in the short term, with
plans by the current government to increase minimum wages by 25%. The taming of
inflation has been a further positive boost to consumers and the main area of downside
risk comes from the effect of a weak labor market, although unemployment is
easing down slowly.
Average monthly incomes increased by 6.3% to BGN 306 in 2004 but average
household spending surged ahead by 14% in the same period. Retail spending grew
at a rate of 13.3% on the year, with household goods and appliances seeing particularly
strong growth (25.2%). Spending has slowed in 2005 but at over 10% remains
very robust.
Key indicators 2003 2004 2005 2006 2007 2008
Real GDP growth (%) 4.3 5.6 4.5 4.7 4.5 4.3
Consumer price inflation (avg %) 2.3 6.1 4.1 3.8 3.6 3.3
Budget balance (% of GDP) 0 1.7 1.1 0.3 -0.3 -0.5
Current-account balance (% of GDP) -9.3 -7.5 -7.2 -7 -6.6 -6.2
Short-term central interest rate (avg
%)
2 1.9 2.3 2.7 3.5 3.8
Exchange rate BGN: USD (avg) 1.73 1.57 1.43 1.4 1.45 1.51
Exchange rate BGN: EUR (avg) 1.96 1.96 1.96 1.96 1.96 1.96
Source: AEAF
With a recent agreement for the potential adoption of the Euro in Bulgaria in 2009 or
2010, thereby reducing exchange-rate risks, trade integration with the EU is expected
to increase. Legislation is planned to allow parallel use of both the Euro and
Spanish Economic and Commercial Office of the Spanish Embassy in Sofia 10