Bulgarian think-tank Industry Watch revised its forecast and expects the economy to grow by 6.2 per cent in 2008 and 6.4 per cent in 2009, investor.bg reported on April 10.

Its estimate is more upbeat than that of the International Monetary Fund, which earlier this week projected gross domestic product (GDP) growth of 5.5 per cent for this year and 5.25 per cent for 2009.

The think-tank's figure, drawing on a consensus forecast of five leading Bulgarian economists, implies that the economy is not at risk of overheating.

Nonetheless, the analysts revised their 2008 inflation forecast upward to 9.6 per cent, up from the autumn 2007 inflation projection of 5.7 per cent. Inflation in 2009 is estimated to slow down to 6.3 per cent.

“We see no risk to the monetary or fiscal stability in Bulgaria,” the report's authors said. Additionally, fast credit growth was not expected to create systemic risks for Bulgaria's banks.

Industry Watch believes the trade deficit will continue to widen because of growing foreign capital inflows. Real growth of goods and commodities exports would reach 7.8 per cent in 2008, compared to an imports growth rate of 9.5 per cent. Next year, exports would pick up to 8.1 per cent in real terms, while imports growth would slow down to 8.9 per cent. Total investment this year should grow by 14 to 20 per cent in real terms.

The main risks or Bulgaria's economy were the trade deficit, the lack of political will for structural reforms, slow improvement of the business environment and the judicial system, the think-tank said.

Fiscal surplus would remain at a healthy 3.2 per cent of GDP because the Government continues to set aside ample resources as a cushion against the bloating current account deficit. This policy, however, limits the chances for higher capital formation in the economy.