Bulgaria's economy could contract already in 2009, the head of the International Monetary Fund (IMF) mission to Bulgaria Bas Bakker told Bulgarian National Radio on March 21.

Although the Fund has said earlier this week that it expected the country's economy to grow by a real one per cent this year, it was not impossible for it to change its forecast, Bakker was quoted as saying.

IMF's forecast, made in a report published on March 17, was the second time the Fund lowered its expectations concerning Bulgaria's economy. In December 2008, when Bakker was in Sofia for a regular Article IV review of Bulgaria's economy, he said that the IMF cut its growth expectation for 2009 from 6.3 per cent to two per cent.

"If you look at other countries in the region, many of them are going into a recession. The downturn in Western Europe has proven to be worse than expected," Bakker was quoted as saying.

"Industrial production in the eurozone fell by 17 per cent in February, which hurts Bulgaria. At the same time, the inflow of capital is decreasing unexpectedly fast. It is certainly possible that the Bulgarian economy will contract this year.

"It all depends on revenues. The lower the Budget revenues, the more spending will have to be cut. The Bulgarian Government will have to decide by how much, but it is obvious that the more you increase pensions and salaries, the less there is left for investment," he said.

Bakker's statement comes just a day after credit ratings agency Moody's Investor Service said that Bulgaria was likely to experience a difficult recession in 2009 as the economy suffers from shrinking exports and slowing inflows of foreign capital.