Abstract
This paper evaluates Bulgaria’s Request for Stand-By Arrangement (SBA). Macroeconomic developments remain broadly favorable, although a rise in the external current account deficit is a concern. Real GDP growth is estimated to have moderated to about 4½ percent in 2001. The authorities have requested a two-year SBA in the amount of SDR 240 million, or 37 percent of quota. The requested SBA would be centered on the currency-board arrangement, a continuation of prudent fiscal and incomes policies, and an acceleration of privatization and other structural reforms.
This statement provides information that has become available since the issuance of the staff report for the Request for Stand-By Arrangement for Bulgaria (EBS/02/24).
Indicators, including on industrial exports and retail sales, suggest a slowdown in growth in the fourth quarter of 2001, perhaps in excess of staff’s expectations. Thus, while the estimate of 4½ percent growth for the year as a whole may still have been achieved, growth on the order of 4 percent now appears more likely.
The consumer price index rose by 2.8 percent in January 2002, increasing the 12-month rate to 7.1 percent. This increase largely reflected the one-time impact of increases in administrative prices, including for energy, and the imposition of new indirect taxes. We do not foresee the need for a major revision in our inflation projections at present.
Monetary data for end-2001 confirm that, as in a number of other southeastern European countries, the changeover to the euro stimulated substantial deposits of DM and other euro-area currencies into euro-denominated deposits in the banking system. This raised the measured money supply significantly in December, but without an actual impact on total liquidity.
A no confidence vote in parliament on February 13 failed by a wide margin, suggesting that broad support remains for the government’s economic program.