French-based credit management firm Coface put Bulgaria in its list of countries under surveillance due to the increasing amount of business risk, the credit insurance agency said in a statement on March 30. Coface also downgraded its country risk rating from "A4", which it assigned in January last year, to "A4-".

Coface's rankings, encompassing 165 countries across the world, reflect the trends in three main directions - business climate, economic and financial perspectives, as well as firm policy regarding payments. The countries are classified in seven risk levels: А1, А2, А3, А4, В, С and D, moving from the safest towards the riskiest end of the scale.

Rising current account deficit has rendered Bulgarian economy highly dependent on foreign investments and has raised the amount of private foreign debt. It is difficult to curtail the deficit in the short run due to the currency board regime, in which the lev is pegged to the euro, as well as the expected slow-down in FDI inflow, Coface Bulgaria chief executive Kameliya Popova said in the statement.

Bulgaria features on Coface watchlist of countries where the business risk is growing, but experts from Coface Bulgaria do not expect this to lead to an actual lowering of the country's rating.

Coface forecast a smooth slowdown of the economy, which does not necessarily exclude the option of achieving growth. The best performing sectors in 2008 are likely to be mining and pharmaceutical industries, insurance and financial services, Popova added.

Bulgaria's current account deficit rose by 57 per cent last year, climbing to 6.18 billion euro, or the equivalent of 21.6 per cent of gross domestic product (GDP) in 2007, up from 3.93 billion euro or 15.7 per cent of GDP in 2006.

Several other countries in the region were put in the surveillance list, as well. Romania's current ranking was demoted from А4 to А4- in September 2007. Also last year, the three Baltic States (Lithuania, Latvia and Estonia) were also rated as countries exhibiting an increasing risk trend. The United States, United Kingdom and Spain entered the watch-out list in 2007, their development being assessed as inclined to downswing. The ratings of the aforementioned three countries slid from А1 to А1-.

These changes are attributed to the global economic meltdown, which is going to preside over in 2008 as well, according to Coface's annual report. The negative tendency will be felt strongest in the developed industrial countries, whereas the growth of developing markets' economies in Europe, Asia and Latin America will lose one per cent as a result of the crisis in the US and West Europe. Coface envisages the world economy to grow by three per cent growth in 2008.