Economic Policy Review ISSN 1313 - 0544

The Economy Shows Consecutive Ongoing Recovery Signals

Author: IME / 24.04.2010
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The last tourism data published by the national statistics have shown the consecutive positive sign for Bulgarian economic recovery. After the positive export growth in November and December 2009, the foreign tourists' number in Bulgaria for January has also increased seriously since last year. After more than a year long decline the number of foreign tourists who have visited Bulgaria marked a 14,3% growth in January 2010 compared to the same month 2009. Even if we take into account the low base from the beginning of 2009 when the tourist flow declined 10%, the January 2010 growth should not be underestimated.

All of the main ingoing tourism markets in Bulgaria have marked a substantial increase and the great number is formed by neighbor countries' tourists. Greece for example has sent 13% more tourists in January. At first glance it is strange that country like Greece which is experiencing such a devastating crisis has generated big tourist flow to Bulgaria. One of the possible explanations is the relatively low Bulgarian resorts' prices which have turned into an attractive destination for the Greeks during a crisis. This most likely provoked the strong tourist growth from other European countries - Serbia (33.8%), Russia (32.0%), Macedonia (28.4%), Finland (7.8%), Romania (7.4%), Britain (6.1%), Sweden (4.9%) and France (4.8%). Other possible explanation is the winter sport bases modernization in the country combined with acceptable prices which attracted foreign tourists despite the uncontrolled resort construction. It would be interesting whether the leading factor for choosing Bulgaria as a winter holiday was the price as in 1-2 years the crisis effected consumer decision making will pass away.

Along with the tourism data, the National statistics institute has published the last business climate study of the economy conducted in February. The data shows business climate retains the same level as of January which can be interpreted as moderately optimistic news too. More interesting is the weak manufacture improvement of business climate - 0,4 points. After signs of decreasing drop in manufacture output and sales in the end of 2009, the February business climate research gives us hope that soon the manufacture will reach its bottom and will start to grow. This is most likely to happen in the 2nd or 3rd quarter of 2010 depending on the external demand status. The retail business climate also marks growth for second consecutive month with 2,2 points for February. We cannot make fundamental conclusions out of this research but the overall data gives us hope for the internal demand recovery process. According to our expectations for growing unemployment during the whole of 2010, the internal demand will most probably stay anemic till the 4th quarter of the year.

Generally the signals for starting economic recovery are increasing in the last weeks. Obviously, the recovery will start in those sectors that rely on external demand due to early onset, and correspondingly earlier overcome of the crisis in the EU. The Central and Eastern European countries could generate demand for Bulgarian goods and services too which will assist the Bulgarian crisis recovery. The previous IMF and European commission forecasts about the regional crisis effects did not come true, which caused an expectations' revision and improved indicators. Bulgarian business must show sufficient flexibility to take advantage of these processes.