Bulgaria headed for two-year recession – BNP Paribas

The Bulgarian economy will be in the depths of a recession in the next two years with dwindling capital inflows and consumption squeezed by the rising jobless rate, forecast BNP Paribas economist Michal Dybula, a co-author of a report on 2009 global economic outlook.

Neighbouring Romania is also in for big trouble with GDP set to drop 0.6 per cent next year, according to the French lender.

The Bulgarian economy will contract 1.2 per cent in 2009 and 0.3 per cent in 2010.

Economic growth will slow down to 2.2 per cent in Q4 2009 from 4.4 per cent in the final quarter of 2008.

The Bulgarian economy is the most rickety across all Central and Eastern Europe, Dybula said in a separate report on the region.

The wide current account gap is the major challenge before Bulgaria in the face of slowing foreign capital inflows.

The expected protracted recession in the eurozone will freeze cash flows to the region and slash jobs of Bulgarian and Romanian migrants making it harder to send money back home and rising domestic unemployment if they return.

Timothy Ash, head of emerging markets at the Royal Bank of Scotland, told Dnevnik the economy will slow down to two per cent and a negative value should not be ruled out either.