THE PURPOSE of this paper is to assemble in systematic fashion the available information on the transactions of the U.S.S.R. with the countries of the Soviet area1 and with the rest of the world during the period 1955–58. Only fragmentary and sometimes conflicting details are available on Soviet international transactions. In recent years, however, the U.S.S.R. has published detailed statistics on exports and imports, and additional data may be derived from Soviet publications and from information published by other countries.
This Selected Issues paper on Bulgaria investigates possible driving forces behind the investment boom based on cross-country evidence. The diagnosis of the drivers behind the investment boom is important as it is key to assessing Bulgaria’s economic prospects, vulnerabilities, and policy challenges. The available evidence is less than clear-cut, but broadly suggests that the investment boom reflects to a large extent a one-off reassessment of Bulgaria’s riskiness as an investment location. The paper also investigates why Bulgaria’s GDP growth rate did not respond more strongly to the investment boom.
The large capital inflows that generated a domestic demand boom in Bulgaria led to strong employment growth. But a sharp reduction in capital inflows led to a contraction of domestic demand, while the recession in Bulgaria’s trading partners caused a drop in exports. Public policies will also need to attune to the domestic demand-driven revenue boom and adjust spending growth to the new environment. Capital inflows are likely to remain low, and domestic demand is expected to decline further, requiring substantial adjustments by both the private and public sectors.