Individual consumption growth and intense investment activity, financed mainly through foreign direct investment, are the key engines of economic growth in EU’s newest members Bulgaria and Romania, the quarterly report for Central and Eastern Europe of UniCredit Group shows.

UniCredit Group economists expected a 6.2% gross domestic product growth in 007 for Bulgaria and around 13% growth in per capita GDP to 3,960 euros in the end of this year. The figures for Romania envisage around 6% economic growth and 5,200 euros per capita GDP in the same period.

“Strong domestic demand momentum and the favourable impact of Bulgaria’s EC accession will maintain the rapid rate of economic growth in Bulgaria in 2007”, Kristofor Pavlov, chief economist of UniCredit Bulbank, comments.

According to the report the immediate investment perspective remains positive. Meanwhile access to EU funds is expected to have insignificant effect on the economic growth in Bulgaria and Romania in 2007, because, similar to other states which joined the EU in its first expansion east, the level of assimilation of the funds in the first year after accession will remain low.
UniCredit Group economists don’t see Bulgaria’s big current account deficit as a sign of lowering competitiveness, but rather as a result of the fact that domestic demand is characterized by high relative share of import.

Individual crediting is expected to grow 33.2% this year from 258 bln euros in the end of 2006 to 344 bln euros in 2007 for the whole CEE-17. Corporate crediting will have a positive impact on the macroeconomic perspective despite the relatively restrictive monetary policy and direct access to alternative financing methods, UniCredit points out.

The bank expects corporate crediting to increase 20.4% from 426 bln euros in 2006 to 513 bln euros in 2007. Crediting in the region as a whole is expected to grow 24.4% to 921 bln euros in the end of 2007.