GDP could decrease by only 4.2% in 2009 and grow by 0.5% in 2010 according to Dimitar Kostov, Deputy Governor of Bulgaria's National Bank (BNB). Mr Kostov said that exports to western Europe could lead to a faster recovery than so far expected. The government currently forecasts GDP to shrink by 6.3% in 2009 and further 2% in 2010. Our view Mr Kostov's view looks optimistic in the light of the government's and other official forecast. It does imply a slowdown in contraction in the second half of 2009, but it does not appear to be unrealistic, given that GDP fell by 4.8% in 2Q09. Construction and financial services will be important swing factors in our view in the near term. But, the need to pursue restrictive fiscal policies could restrain the potential for recovery in 2010 in our view, which means that access to internatinal capital markets and the re-emergence of FX-linked lending will be other important factors determining Bulgaria's growth outlook. At the moment we are sceptical as to how soon these drivers could positively affect growth in Bulgaria and hence we reiterate our forecast of -1.0% growth in 2010.