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The Bulgarian economy will rebuild slowly

Submitted on Monday, 10 August 2009No Comment

According to the latest research of the economists from UniKredit Group on the development of the banking sector of Central and Eastern Europe, the banking sector of the region is still attractive in a long term, despite the days of hardships.

This was announced by the Bulgarian press center of the banking group.

According to the research, the first signs of the restoration of the international economies will be felt in the region as well, but the economic growth will remain below it’s full potential for a while.

The clear distinction between the countries in the region is once again confirmed, with the countries in Central Europe and Turkey being better prepared to “catch the wave” of international restoration.

The economies of the countries in the Central and Eastern European region realized the “crash landing” scenario, and the region registered a bigger drop of the GDP than in the US, where the crisis first started.

The analyzers from UniKredit expect more countries from the region to exit the “red sector” next year and report growth of the GDP.

Bulgaria however, will be among the slowest economies to recover, and will report a 3% drop of the GDP in 2010. The prognosticated decrease for this year is 6%.

Only Latvia is expected to report a greater decrease in economics – 3,9%.

International financial markets are no longer lacking liquidity – now the main constraint for them is the quality of crediting. According to the research, the long-term perspectives for the development of the banking sector of the Central and Eastern European region remain the same.

After the significant decrease of economic activity this year, economists predict a gradual restoration of the economic growth in the region by 1,1% in 2010, which is a definitely positive signal, but still far from the potential of Central and Eastern Europe.

The drastic reduction of public expenses is the way out of the crisis, according to Leshek Balcerovic – father of the post-communist market economy in Poland, the only economy that still resists the global problem.

A wide spread belief states that the reason for the current crisis lies in the free market.

I think this is largely incorrect, stated the ex-finance minister of Poland and ex-manager of the Polish central bank in an interview for the AFP.

It’s easy to find the political mistakes that lead to the current situation through empirical means, pointed out Balcerovic, who is often praised for his iron budget discipline.

According to him, the heavy economic crisis is due to the loose monetary politics of the Federal reserve of the US since 2000, a doctrine he calls “the doctrine of the accessible home”.

He also thinks that a return to budget conservatism is necessary.

The key is sustaining the correlation between public expenses and GDP, which will allow steady growth without a credit balloon. To accomplish that, a reduction of expenses, especially in the social sphere, is needed – a politically unpopular move, says he.

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