With new statistics showing a widening trade gap getting wider, the country's accelerating balance of payments problems came increasingly under the spotlight this week. Yet despite obvious concerns, the problem was widely thought not as bad as it might seem, given a variety of more positive factors lying behind the figures. Meanwhile, the figures showed some other important signs of just where the overall economy is at these days, and where it might be going.
National Statistical Institute (NSI) figures released mid-April showed the January 2004 current account carrying a deficit of some 232.8m euros, up from 159.4m the same month a year earlier. Meanwhile, the trailing twelve-month (TTM) current account deficit totalled 1.6m euros, compared to 1.5m in 2003, according to First Financial Brokerage House in Sofia.
As for the balance of trade, this showed a 154.5m euro deficit in January 2004, well up from the 68.6m recorded in January 2003. Looking more closely at these figures, part of the jump was accounted for by a rise in imports and a decline in exports from and to eurozone countries.
Analysts largely concurred that there were three main factors behind the deteriorating balance of trade. One of these was the high exchange rate between the euro and the US dollar, while there was also an increase internationally in the price of certain commodities, some of which were basic to Bulgarian exports. Having a more positive impact was a slight fall in oil prices.
More structurally, there has also been a shift in the contents of Bulgaria's export and import manifests in recent months. With EU membership coming up and the increasing pressure on Bulgarian companies to face up to potentially stiff competition - and stiff EU regulations - the need to upgrade and improve existing technology and infrastructure has grown greatly.
This has led to a higher import bill, as companies bring in new equipment and refurbish their plants and facilities. In the year ending January 2004, imports of equipment increased by some 17%.
Meanwhile, Bulgarians have also found themselves with much greater access to credit than before. Expansion in bank lending, credit cards and other loan instruments to consumers led to a sharp rise in consumer purchases of imported goods. These were up 18% over the January 2003-January 2004 period.
Yet at the same time, this credit expansion does not seem to have had a major impact on prices. In contrast, the NSI data also showed mild deflation in March 2004, with the Consumer Price Index standing at 99.9%. Basic foodstuffs fell by 0.3% in price over the month, although prices in retail food establishments went up. Likewise, an increase in national annual per capita income to Lv2129 (up 34% on 2001) reported by the NSI seems to have no real effect on prices.
So, while the growing balance of the trade deficit has to be a worry, it does also indicate a growing economy and Bulgarian businesses - and consumers - engaging with the new economic conditions of the country, many analysts point out.
The NSI figures also illustrated the main target countries for Bulgarian exports. Italy weighed in first, taking Lv272m in January and February this year, with Germany second on Lv261m and Greece third on Lv252m.
As for imports, the main traders to Bulgaria were the Russians, who sold Lv415m of goods to the country. This left Bulgaria with a $1bn deficit in bilateral trade last year, according to Foreign Ministry official Veselin Ivanov.
He told the Bulgarian news service BNN that Bulgaria's exports to Russia amounted to only $92m over the same period - a yearly rise of some 14%, but still, "This deficit is difficult to compensate," he said. "Bulgaria imports from Russia mainly oil, natural gas and coals and exports farming products."
The solution to the imbalance, Ivanov said, was to encourage a lot more Russians to spend their roubles on coming to Bulgaria on holiday. This is a strategy that might redress trade imbalances with other countries too, of course, with Bulgaria's Black Sea coast again shouldering responsibility for taking more of the heat out of the country's current account difficulties.
Yet the NSI figures show that the level of foreign investment - which in the past has been a major source for the development of sectors such as tourism and real estate - is declining. At the end of January 2003, FDI stood at 81.5m euros. This then fell to 47m euros at the end of 2003, and was down at 31.4m in January 2004. This is still substantial, but perhaps, some analysts argue, represents a natural tailing off after the large investment flows of recent years.
There are, however, still many areas thought likely to attract further foreign interest. One of these may well be the insurance sector - at least according to the Financial Supervision Commission's Nuredin Kafelov. He told reporters and financiers mid-April that at present, foreign insurers held two-thirds of gross premium revenues in Bulgaria, with 17 of the 28 joint stock companies operating in the sector partly or fully foreign owned. He added that other foreign entities were expressing an interest in joining them.
Yet there are still serious questions facing the insurance sector - principal among them being the lack of an adequate legislative and legal framework for the market. Supervision in the sector is also lacking, with many leading insurance houses predicting a major crisis ahead if these concerns are not addressed rapidly and adequately.
While insurance has some very particular problems, this may not be an entirely misplaced metaphor for much else. While the balance of the trade deficit can be accounted for by the inevitable cost of positive developments and improvements, there is clearly a need for some safeguards - while the still low levels of per capita income and the deflation witnessed in consumer prices indicate a deeper social problem with economic transformation. And that problem is also having political consequences - as the government is no doubt aware when it looks at its still uncomfortably low poll ratings.