18.11.2011

The 2012 draft budget approved at first hearing by the Bulgarian parliament should put the country on a path to further reduce its deficit, says a statement of the Fitch Ratings Agency, with which Bulgaria terminated its contractual relations in 2010, retains its positive outlook for the country.

The draft budget targets a deficit of 1.3% of GDP. This is predicted on 2.9% economic growth, a level we consider optimistic given the slowdown in the eurozone, say Fitch and remind that the European Commission puts Bulgaria\'s growth rate at 2.3%. However, Bulgaria has also based its figures on 1% revenue growth, which we to be cautious and achievable, the agency adds.

Bulgarian economy has displayed impressive flexibility in adjusting to the global financial crisis, Fitch also comment and add that they expect exports to weaken given the increasing risk of recession in the eurozone. The agency expresses a fear about the amount of non-performing loans but they note that the rate of increase has slowed down compared with the start of the crisis.

Agency analysers see as a challenge that over 40% of Bulgarian banking system assets is owned by Greek and Italian banking institutions but they currently consider the banking system to be sufficiently robust to the risk of an extreme deterioration in the Greek and Italian financial system.