BULGARIA: CURRENT ACCOUNT DEVELOPMENTS & FINANCING REQUIREMENTS Presentation for the Investor Trip organized by JP Morgan Sofia, 27 September 2001 Prepared by Emil Dimitrov

Worsening of the External Environment in 2001 »Overall world GDP growth 1.4% in 2001 compare to 3.8% in 2000 u GDP growth decline in EU (51.3% share of exports in 2000) 1.9% in 2001 compare to 3.4% in 2000 u Germany, 0.9 in 2001 (3.0% in 2000) u Italy, 1.9% in 2001 (2.9% in 2000) u Crises in Turkey (10.1 % exports share in 2000) u Between 6-7% GDP decline in 2001 compare to 7.2 % growth in 2000 »Key Commodity prices decline (as of July 2001, yoy) u Steel % u Copper -15.2% u Urea - 26%

The worsened external environment was behind the mixed exports picture in Jan-July 2001 (1) TOTAL EXPORTS WERE UP 7.3% YOY (25% YOY IN 2000) »Exports growth increase: u Consumer goods 17 % yoy (7.8% in 2000) –Clothing and footwear 28.4% yoy (20.7 in 2000) u Investment goods 5.2% yoy (-11.1% in 2000) »Exports growth decline: u Intermediate goods 0.4% yoy (34.6% in 2000) u Mineral fuels & electricity 10.5% yoy (153% in 2000)

The worsened external environment was behind the mixed exports picture in Jan-July 2001 (2)

The worsened external environment was behind the mixed exports picture in Jan-July 2001 (3) TOTAL EXPORTS WERE UP 7.3% YOY (25% YOY IN 2000) »Exports increased to: u CEFTA countries 42.6% yoy (10.2% in 2000) u USA 51.1% yoy (29.6% in 2000) u CIS and Baltic countries 6.0% yoy (-25.5% in 2000) »Exports declined to: u EU 11.8% yoy (23.5% in 2000) u Italy 1.7% yoy (39.1% in 2000) u Turkey -10.0% yoy (69.4% in 2000)

The worsened external environment was behind the mixed exports picture in Jan-July 2001 (4)

Lower External Demand and Lower Oil Prices Affected the Imports Growth in Jan-July 2001 (1) TOTAL IMPORTS WERE UP 14.1% YOY (19.2% IN 2000) »Imports growth increase: u Consumer goods 23.2 % yoy (9.0% in 2000) u Intermediate goods 22.7% yoy (13.1% in 2000) »Imports growth decline: u Investment goods 9.1% yoy (10.0% in 2000) u Mineral fuels & electricity 2.2% yoy (50.6% in 2000)

Lower External Demand and Lower Oil Prices Affected the Imports Growth in Jan-July 2001 (2)

Real Exchange Rate Appreciation Contributed to the Imports Growth in 2001 (1) »Real effective exchange rate appreciated 8.1% in June July 2001 »Factors behind that appreciation were: u CPI difference u Net capital inflows u Ballassa-Samuelson effect »However, against the DM real exchange rate appreciation was 30.1% »Total imports growth Jan-July 2001 was 14.1% yoy while the imports from EU 23.2 % yoy

Real Exchange Rate Appreciation Contributed to the Imports Growth in 2001 (2)

Real Exchange Rate Appreciation Contributed to the Imports Growth in 2001 (3)

The Travel - a Key Current Account Item

The Trade Balance is Behind the Increasing Current Account Gap

Higher Financing Requirements in u In 2001 larger public sector principal payments 57.9% yoy, but slightly lower in % yoy u Under this scenario the current account deficit is 6% of GDP in 2001 and 5.5% in 2002.

Despite the financing sources the IMF support in 2002 is necessary u A decrease in public sector disbursements 15.8% in 2001 yoy but 26.1% increase in 2002 u Almost 50% of the FR in 2001 are expected to be covered by FDI, and 55% in 2002

BULGARIA: CURRENT ACCOUNT DEVELOPMENTS & FINANCING REQUIREMENTS Presentation for the Investor Trip organized by JP Morgan Sofia, 27 September 2001 Prepared by Emil Dimitrov