27.01.2012

BULGARIA FINMIN SAYS GDP GREW ABOUT 2,2-2,3 PCT IN 2011, SEES  GROWTH OF

2,5-3 PCT THIS YEAR

Simeon Djankov in an interview with Reuters

Bulgaria's centre-right government will push ahead with privatising state assets this year and plans to issue a Eurobond worth up to 1 billion euros in the second quarter, its finance minister said on Thursday.  Simeon Djankov, in an interview with Reuters, said the government aimed to sell a stake of between 10 to 25 percent in state energy company BEH via a foreign stock exchange by the end of the year, which could raise "several hundred million euros".  The government will also push on with reforms of healthcare and the police to try and make them more efficient. Djankov said the government should beat its budget deficit target of 1,3 percent of GDP this year and said its economic growth estimate of 2,8 percent now looked achievable. 

The government's drive to improve efficiency since it took power in 2009 has helped boost public finances and Bulgaria, the European Union's poorest member, has one of the bloc's lowest debt-to-GDP ratios at 16 percent.  It has 816 million euros in a bond redemption due in January 2013 and will aim to tap both local and international markets to help it make payments, Djankov said.  The Eurobond would be for a seven-year term and worth between 500 million and 1 billion euros, he said.  

The domestic market looks attractive after the ministry sold seven-year paper at a yield of 3,9 percent this week. Djankov said pension funds and local banks have extra liquidity and would be willing to put it in government papers.  "We are now considering a more mixed strategy where we will tap the domestic market and for the remainder we will go to the eurobond market," Djankov said. 

A government growth forecast of 2,8 percent for this year had looked optimistic until the last few weeks, but it now looked more achievable given signs of an upturn in both exports and domestic demand, Djankov said, adding he sees growth of 2,5-3 pct.  "In the last month, month and a half finance ministers - generally pessimists - are starting to be a bit more optimistic," Djankov said. 

"There are signs in the last few weeks of Europe doing better than the very pessimistic forecasts that were coming out," he said. "This is also the case for Bulgaria." 

German business sentiment rose for the third month in a row in January, beating expectations and offering fresh evidence that Europe's largest economy is shrugging off a sovereign debt crisis that has hammered growth in other euro zone countries. 

Bulgaria is still recovering from a deep recession but probably grew 2.2-2.3 percent last year, according to Djankov, and by maintaining a tight fiscal policy it has not had to bring in severe austerity measures like neighbours Greece and Romania.  Analysts are however still cautious. They see the economy expanding by 1,2-1,5 percent this year. 

Djankov said the government should be able to beat its budget deficit target of 1.3 percent of gross domestic product this year, which was important to avoid pressure on its currency peg to the euro.  "This year's forecast is 1,3 percent and I think we can do better than that," he said. 

The currency peg means interest rates must track euro zone rates, leaving fiscal policy as the government's main tool to influence the economy.   The government is not worried about that peg because it is actually to the Deutsche mark and - in the event of any changes to the euro zone - it would continue to follow whatever Germany used, Djankov said.