International Monetary Fund has revealed in its Bulgaria Country Report that its export volume growth has slowed due to summer floods, elimination of EU textile import quotas, including restructuring in the metals sector.
The country due to relative unit labor costs and export market shares though satisfactory, has remained an attractive destination for foreign investment.
Report also states that real export growth in 2005 was depressed by several temporary factors.
The summer floods damaged crops and infrastructure, affecting exports of agricultural raw materials and processed goods.
Major steel producer in the country, currently engaged in a substantial expansion of capacity, shut down part of its plant, and the impact of the expiration of the Multi-Fiber Agreement was larger than anticipated.
Together, these factors affected nearly 35 percent of merchandise exports. However, in other areas—especially manufactured investment goods, but also consumer goods excluding textiles—export growth was robust.
This, together with indicators such as a decline in relative unit labor costs and rising export market shares, suggests that lack of competitiveness is not the root cause of the slowdown in export growth.
Accordingly, reimposition of quotas on Chinese textile exports to the EU in the second half of 2005, substantial additions to capacity at the steel plant, high recent investment more broadly, and the recovery from the floods should help export growth return to its previous trend in 2006.
IMF says that fiscal tightening, credit restraint, higher food and energy prices, and excise tax increases are expected to reduce the growth of real domestic demand and imports, but export growth should rebound in response to recent investment to expand capacity and the reimposition of textile import restraints by the EU.
All this lead the IMF to peg up the real GDP to grow by 5.5 percent.
International Monetary Fund
marketing@alchempro.com
