-  7  -

registered healthy growth after two years of contraction, total trade—due to the decline in the value of exports—contracted in terms of their share in the GDP.

**Table 1;** _Developments in trade in goods and services in 1992-2003 (in millions of current US dollars)_

||1991|1992|1993|1994|1995|1996|1997|1998|1999|2000|2001|2002|2003|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Exports of goods and<br>services|4,137|5,026|4,898|5,192|6,738|6,608|7,011|5,981|5,795|7,000|7,539|8,286|10,590|
|of which: services|400|1,070|1,172|1,257|1,771|1,919|2,202|1,788|1,788|2,175|2,426|2,594|3,115|
|Imports of goods<br>(fob) and services|4,255|5,334|5,841|5,198|6,636|6,152|5,845|5,989|6,562|7,670|8,575|9,287|12,151|
|Of which:services|486|1,165|1,229|1,246|1,706|1,585|1,357|1,415|1,474|1,670|1,882|2,000|2,439|
|Balance in total trade|-118|-308|-943|-6|102|456|1,166|-8|-767|-670|-1,036|-1,001|-1,561|
|In goods|-32|-213|-886|-17|37|122|321|-381|-1,081|-1,175|-1,580|-1,595|-2,237|
|Inservices|-86|-95|-57|11|65|334|845|373|314|505|544|594|676|
|Exports of goods and<br>services as percent of<br>their imports|97.2|94.2|83.9|99.9|**101.5**|**107.4**|**120.0**|99.9|88.3|91.3|87.9|89.2|87.2|
|Exports of goods as||||||||||||||
|percent of their<br>imports|99.1|94.9|80.8|99.6|**100.8**|**102.7**|**107.2**|91.7|78.8|80.4|76.4|78.1|77.0|
|Share of services in<br>exports|9.7|21.3|23.9|24.2|26.3|29.0|31.4|29.9|30.9|31.1|32.2|31.3|29.4|
|Total trade in goods<br>and servicesinGDP|76.7|94.7|103.5|95.9|136.7|**97.4**|129.8|115.4|**97.0**|113.2|127.8|129.3|146.8|

Source: Bulgarian authorities and Fund staff estimates.

Yet, in retrospect, the contraction in exports of goods in 1999, triggered by long delayed industrial restructuring, set the stage for a strong recovery phase that began a year later. An indication of restructuring was the growth in imports of machinery. Their share in total imports increased from 14 percent of total imports in 1997 to 16 percent in 1998 and jumped to 21 percent in 1999.<sup>5</sup> Year 2000 witnessed a turnaround in both exports and imports. Since 2000 trade in goods and services has expanded faster than the GDP, reversing the developments in 1996 and 1998-99.

Notwithstanding low reliability of data on trade in services, usually underreported in most balance of payments statistics, services appear to have been a bright spot in Bulgaria’s external performance. First, it has been a net foreign currency earner, with the surplus reaching US$ 676 million in 2003. Except for a short period in 1995-1997 coinciding with the 1996-97 financial melt-down, Bulgaria ran a deficit in its trade in goods and services. Exports of goods as percent of their imports have been at slightly below 80 percent since 1999.

Second, in contrast to exports of goods, the contraction in exports of services during the 1996-99 crisis phase was much smaller and extended over a shorter period of only two years, that is, 1996 and 1997. They began rebounding in 1998, but they exceeded the pre-crisis level only in 2001. The share of services in Bulgaria’s total exports of goods and services increased from 22 percent in 1996 to 30 percent in 2003, with the share of travel in foreign exchange receipts from services growing from 28 percent to 52 percent over this period.

Yet, there is still a significant untapped potential to increase earnings in the future. The IMF projects strong growth of exports of services over 2004-06 mainly due to tourism revenues. It predicts a 24 percent growth in exports of travel services in 2004 and a ten-percent increase in 2005 (IMF 2004).

Another reason for optimism relates to current and future exports of computer services. While the quality of statistics is particularly poor in this sector, simply because cross-border 5 Machinery is defined as items in SITC. 7 (excluding automobiles). Own calculations based on foreign trade data reported by Bulgaria to the UN COMTRADE database.