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Bulgaria, Romania and Croatia competitive despite current account deficit

Date: 30.03.2007

Bulgaria, together with Romania and Croatia experienced sufficient increase of its current account deficit.

According to Fitch Ratings the increase of current account deficit shows higher domestic demand rather than competitiveness crisis in these countries.

Bulgaria's current account deficit reached 16.3 per cent of the country's GDP in 2006 while Croatia registered a deficit of 8.1 per cent and Romania 10.3 per cent.

At the same time the three countries registered export growth as the average increase for Bulgaria and Romania for the period from 2000 to 2006 was 21 per cent annually and for Croatia- 12 per cent.

The trade deficits of the three countries also went up.

The increased current account deficit has to be funded through higher foreign capital inflow.

Bulgaria, Romania and Croatia are now funding their deficits through direct foreign investment. Yet their Gross Foreign Debt (GFD) keeps increasing in relation to the GDP.

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