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framework 4.1%-6.6%. In 2005 the GDP growth was 6.2% and preliminary datafor 2006 indicate economic growth of 6.1%. GDP growth is due both to the risinghousehold consumption and export. Inflation rate dropped from 11.4% in 2000to 2.3% in 2003, and 5.0% in 2005. For 2006 the year-end inflation is 6.5%.Trade deficit in January – December 2006 amounted to EUR 6 392.4 million(21.5% of GDP) and increased by EUR 1 161.5 million compared to the sameperiod in 2005 (a deficit of EUR 5 230.9 million, 20.2% of GDP). The balanceon services was positive amounting 2.9% of GDP, against a positive balanceamounting to 3.7% of GDP) for the same period in 2005.In the end of 2006 the financial account was positive amounting to EUR 5395.6million (21.5% of GDP) compared to a positive balance of EUR 3560.1 million(16.3% of GDP) for the same period in 2005.The share of the short term debt in the gross external debt by the end of 2006was 30.6%, compared to 24.9% by the end of 2005.In April 2005 Bulgaria signed the accession treaty with the EU and from January1st 2007 is a full member. At the beginning of 2006, 89.4% of the long-termassets of the state owned enterprises were transferred into private hands with afinancial effect of EUR 7.96 billion. Banking sector privatisation is close to completionwith just one state bank operating on the market, specialized in smalland midsized enterprises business support. About 99% of the agricultural landand 92% of forest areas have been returned to their former owners.In 2004-2005 the business climate in Bulgaria constantly improved, in 2006 thecomposite business climate indices obtained the highest level since the beginningof economic reforms in 1990. In the first half of 2006 the indices were 5-7percentage points higher than the average level for 2002-2005. In the secondhalf of the 2006 the level of the indices was 40-45 percentage points higher thanthe average level for 2002-2005. By the end of December 2006 the indicatorincreased by 1.2 percentage points against its November level, which was dueto the more favourable economic conjuncture in the service sector, industry andretail trade.In Industry the latest inquiries in December 2006 indicate higher productionactivity of enterprises and increased expectations over the next 3 months. Asregard to the selling prices, the industrial managers (73.8%) did not predict anincrease.In Retail trade the December 2006 economic conjuncture remained favourableand the composite business climate indicator increased by 0.9 percentage points8 BSMEPA