Deal with the IMF will soothe fears but will not revive economy

Bulgaria’s next government faces depth depression and imminent credit agreement with the IMF, says Neil Shiaring European economist for emerging markets at Capital Economics – Macroeconomics by an independent consultant based in London. On the phone with him talking of Elizabeth Konstantinova agency Bloomberg.
Shiaring however, warns that the IMF can not help much to prevent recession, but will reduce the pressure on the currency board in the short term. His prognosis for the Bulgarian economy is 5 percent annual decline in GDP this year and 4 percent for the next. Fixing of euro to the euro and a currency board system does not allow his country to improve its competitiveness through devaluation of the euro. The Central Bank refuses devaluation motivated that its $ 16 billion reserve, which is sufficient. According to BNB experts rely on „internal devaluation“ by the pressure to reduce wages and prices. Shiaring believe that this will cause deflation and prolonged recession.
Evaluation of Capital Economics Bulgarian external financing needs for this year are equal to $ 25 billion, which includes the current account deficit, short-term service payments for private external debt and interest payments, says expert.
According to him the outcome of elections is good for the markets and the conclusion of any deal with the IMF will mellow fears of imminent financial crisis, but will not help in the rapid recovery of the real economy.

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Finance

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