Bulgaria’s economic growth was 5.5 per cent in 2005 from a revised 5.7 per cent for 2004, the National Statistical Institute (NSI) said at the end of March.

The growth drop last year was a result of slower growth in the industrial sector and a modest rise in exports in the third quarter.

Growth in the industrial sector was 3.8 per cent and the export rise was 1.1 per cent in the third quarter, when the country was hit by torrential rains that damaged crops and killed livestock, compared to growth rates of 5.9 per cent and 8.9 per cent, respectively, in the fourth quarter, NSI data showed.

GDP in the industrial sector grew by 7.3 per cent in 2005, and exports rose 7.2 per cent.

Bulgaria’s GDP reached a nominal 41.948 billion leva (21.4 billion euro) in 2005, up from 38.275 billion leva in 2004.

GDP rose by a real 5.5 per cent year-on-year in the fourth quarter, compared to a 4.6 per cent rise in the third quarter, a 6.5 per cent growth in the second quarter and a 5.9 per cent increase in the first quarter of last year.

The GDP in the services sector rose by seven per cent in the fourth quarter and by 6.6 per cent over the whole year. GDP in the agricultural sector fell by 17.1 per cent from October to December and declined by 8.6 per cent over the whole year.

Services contributed the biggest share - 51.8 per cent - to the country’s GDP last year, followed by the industrial sector with 26.1 per cent and the agricultural sector with eight per cent.

Despite the slowdown in the economic growth figure for 2005, compared to 2004 when it was 5.7 per cent, analysts said the data showed robust economic activity and a good recovery from the devastating summer floods last year. In the view of many specialists quoted in the local media, the figure was not a disappointment at all, provided the floods and other negative developments in the course of 2005.

Although the import of goods and services increased at a quicker pace than export, this should not pose a macroeconomic problem. The trade deficit was largely the result of inflow of foreign capital and not of a drop in domestic savings.

The Cabinet’s fiscal policy was defined by analysts as conservative enough to result in reduced collective consumption shown in the national accounts. This is a positive signal for fiscal stability and may open up further opportunities for tax cuts in 2006.

According to InvestBulgaria Agency, foreign direct investment (FDI) in 2005 totalled 2.3 billion euro. Estimates of the agency show the expectation for FDI in 2006 reaching up to three billion euro.