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Analysis of external debt: Romania vs Bulgaria

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The Bucharest Academy of Economic Studies INTERNATIONAL BUSINESS AND ECONOMICS Analysis of external debt Romania vs. Bulgaria 2010 CONTENT I. General information about Bulgaria and Romania.............................3 II.General definitions..............................................................4 III. Analysis of external debt - ROMANIA...................................6 IV.Analysis of external debt - BULGARIA..................................11 I. General information about Bulgaria and Romania * official name (short form): B´┐Żlgarija * country code ISO: BG * time zone: +2 UT * surface (land) area: 110994 sq.km * borders (land): Romania, Serbia (Fed. Yugoslavia), Macedonia (FYROM), Greece, Turkey, (coastline): Black Sea * independent since: 1877; 1908-05-10 * type of government: republic * capital: Sofija * population according to the last census: 7973,671 * population density: 72 per sq.km = 187 per sq.mi * population growth: -0,5% //; deminishing population * life expectancy: 72 years (male: 68; female: 75) * urbanisation: 70% //; - urbanisation growth: 2,6% * ethnic groups: Bulgarians 86%; Turks 9%; Roma 3,7% ; Macedonian 1,2%; Armenian, Romanian, Greek * currency: [Nova] Lev (Lw) (plural: leva) = 100 stotinki * official name (short form): Rom´┐Żnia * country code ISO: RO * time zone: +2 UT * surface (land) area: 237500 sq.km * borders (land): Bulgaria 631 km, Yugoslavia 546, Moldova 681, Ukraine 649, Hungary 448, (coastline): Black Sea 194 km * independent since: 1859 ; 1862 ; 1877-05-21 * type of government: republic * capital: Bucuresti (Bucharest) * population according to the last census: 22435,000 * population density: 93 per sq.km * population growth: -0,4% //; deminishing population * life expectancy: 70 years (male: 66; female: 74) * urbanisation: 56% //; - urbanisation growth: 2,5% * ethnic groups: Romanian 89,5%; Hungarian 7,1%; Roma 1,7%; German 0,5%; Ukrainian 0,3%; Russian 0,2%; Turk 0,1% * currency: Leu (plural: Lei) = 100 bani II. General definitions 1. What is external debt? When material resources and / or financial aspects of an economy do not cover domestic demand, the supply deficit is covered by importing goods, services and capital. ...read more.


Euro) 13,18 14,99 17,14 18,28 21,83 26,35 31,43 36,43 42,47 DEX = DE / X 0,85 0,91 0,87 0,86 0,83 0,93 0,91 1,06 1,21 GDP (bld. Euro) 40,27 44,86 48,46 52,60 61,03 79,74 97,78 124,65 136,84 DE /GDP x 100 28,0 30,4 30,8 30,1 29,9 30,9 29,2 31,0 37,6 SDEX = SDE /X x 100 21,1 24,3 24,8 20,8 22,8 51,5 63,0 82,1 107,3 1) External's Debt Ratio Indicators The external debt ratio represents the amount of external debt on long and medium term, being calculated at the end of the calendar year or at the end of the financial one. In Romania's case, the external debt ratio increased every year. For the dynamic analysis of the external debt amount, we use the external debt index, calculated with fixed and mobile basis. IDE t / 0 = DEt / DE0 x 100 - with fixed basis Where DEt = the current external debt DE0 = the external debt in base period IDE t / t - 1 = DE t / DE t - 1 x 100 - with mobile basis Where DE t = the current external debt DE t - 1 = the external debt in the previous year These indicators show how many times the external debt increased from the base year or from the previous one. In Romania's case, the IDE calculated with a fixed base, increased from year to year, doubling from 2000 to 2005; peaking in 2008 when it was more than double that of 2005. Calculated based IDE furniture shows an increase from year to year,with a stronger growth in 2001 compared to 2000 (21%), 2005 vs. 2004 (34%) in 2007 compared to 2006 (35%) as well as 2008 compared to 2007 (32%). The analysis of the external debt index doesn't offer relevant information, because it regards only one indicator, but it may be the first step to more detailed analysis, given that the information provided by IDE is correlated with the information about the level of GDP, imports, exports, industrial production and others. ...read more.


Compared with Romania, Bulgaria's per capita foreign debt is always higher, being more than double in 2000-2001, in 2007 is higher by 42.5%,respectively 31.3% in 2008. We note, therefore, a reduction of the difference between Romania's and Bulgaria's DEP. Also, as in the case of Romania, we can observe its annual constant decrease in the number of inhabitants. The ratio of external debt and receipts from exports of goods and services (DEX), exceeded slightly in 2000 the value of two years, later descending and remaining constantly under this value, droping continuously between 2001 and 2006, from 1.89 years to 1.21 years and increased thereafter to 1.45 years in 2007 and to 1.57 years in 2008. Also in the case of DEX, Bulgaria is in a less favorable situation than Romania, for the entire period studied: we can still observe, through time a decrease of DEX difference between the two countries. It can also be observed, for both countries, continued annual growth of the value of exports. The weight of external debt in GDP (PDE) of Bulgaria exceeds permanently the recommended limit of 50%, except for the years 2003-2005, when it is consistently slightly below this value (49.5%). Regarding the GDP, it increased continuously from 2000 until 2008, as in the case of Romania. Also in what concerns PDE, Bulgaria is in a less favorable situation than Romania, for the entire period studied, whilst a decrease of the differences between the two countries PDE is visible, in 2000-2005, followed again by an increase in the gap at the expense of Bulgaria, between 2005 and 2008. The ratio of external debt service and export has been continuously above 15%, strongly increasing to 63.6% in 2005, then declining sharply in 2006 to 38.1% and 46.5% thereafter increasing next year and 47.8% in 2008, the purchasing power of exports being affected by external debt service. At this point, the purchasing power of exports has been affected by external debt service. Romania is better on this indicator only in the years 2000-2001, 2004-2005, afterwards the Romanian SDEX having surpasses Bulgaria's, being more than double that in 2008. ...read more.

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