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Record GDP growth for Bulgaria

24th July 2008 Print
Bulgaria’s GDP growth reached record levels of 7% during the first 6 months of 2008, according to a report by Macro Watch, a group formed by the Open Society Institute (OSI) in Sofia. The report proved that Bulgaria’s economy is more than holding its own among the more mature EU economies and OSI predicts that inflation during 2008 will be down to around 9%, a significant drop from present levels of around 14%. Part of the reason for the predicted fall in inflation is that the burden of rising prices has shifted away from necessities such as food to less basic-need items.

The government’s stringent economic policies are now bearing fruit; Bulgarian National Bank reserves reached record levels of €13 billion and growth of Bulgaria’s exports has exceeded imports for the second quarter in a row. In addition, tax revenues have increased after the government dramatically cut both corporate and incomes taxes to 10% at the beginning of 2008. All these factors have contributed to Bulgaria’s impressive budget surplus, with debt at its lowest level ever.

Bulgaria’s tax policy has the approval of the World Bank, which has ranked Bulgaria Number 1 in the world in terms of its tax policy. Prime Minister Sergei Stanishev said “Bulgaria is the only EU country which is ranked among the world’s top ten countries most appropriate for investment.”

One of the most exciting developments for the Bulgarian economy is the prospect of an intergovernmental agreement about the Nabucco natural gas pipeline. Bulgaria is keen to start talks as soon as possible with the governments of Turkey, Austria, Romania and Hungary to speed up work on the pipeline. When completed, it will serve as the EU’s alternative route to the Russian-Italian South Stream pipeline. According to the Sofia Echo, the 3,300 kilometre pipeline will carry 30 billion cubic metres of Caspian or Middle Eastern natural gas every year from Turkey to Austria via Bulgaria, Romania and Hungary.

James Gonzalez, Market Analyst at Obelisk, says, “The future is looking very bright for property investors in Bulgaria. The Micro Watch analysis of the country’s economy is a very positive sign, especially as it includes recommendations to maintain and improve on economic stability. Among them are the acceleration of infrastructure reforms and a reduction in social security payments and the VAT rate, which is currently pretty high at 20%. It is thought that the country’s enormous budget surplus may be used to reduce this rate to 15%. If Bulgaria continues to achieve this kind of record growth, they will be fighting off property investors, keen for a slice of the action.”

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