For the first time in five years, Bulgaria reported a current account surplus after consumers reduced their spending, according to central Bulgarian National Bank figures.

The current account surplus for July 2009 was 102 million euro compared with a 439 million euro current account deficit in July 2008.

In the seven months up to July 2009, the shortfall narrowed to a preliminary 7.2 per cent of projected gross domestic product (GDP) from more than 14 per cent in the same period of 2008.

But the surplus was pinned on a decline in consumer spending as recession forced households to tighten their belts.

People were spending less and saving more, Dimitar Chobanov of the Institute for New Economic Progress told news agency Bloomberg.

The surplus was helped by a fall in trade deficit by 328.3 million euro and a 113.1 million euro increase in tourism currency inflows. A 95.8 million euro reduction in income deficit also came into play.

Before the crisis erupted, the current account deficit was seen as the most daunting challenge for the stability of the Bulgarian economy, which was the only one in the European Union to finish in the red, with a nagging deficit of more than 24 per cent of GDP. But the gap almost halved between January and July 2009 to 2.8 billion euro compared to five billion euro a year earlier.

On the flip side, the current account deficit since the start of 2009 surpasses by a wide margin the financial and capital account surplus.

Currency reserves, which support the currency board mechanism pegging local currency the lev to the euro, shrank by 180.3 million euro  in July and 1.07 billion euro for the seven months.

Foreign direct investment (FDI) dwindled to 1.88 billion euro, covering a paltry 76.8 per cent of the current account deficit against more than 100 per cent at the time when the economy powered ahead.

Source: Dnevnik.bg