In one of the bleakest forecasts about the Bulgarian economy since the outbreak df the crisis, Capital Economics believes Bulgaria’s economy will shrink by -5% this year.

Capital Economics said exports and inbound investment flows will collapse, shrinking the money supply and forcing the Government to drain fiscal reserves to restore liquidity.

This move would buy the Cabinet about a year, but then the reserves will be exhausted and force the country to get help from the International Monetary Fund (IMF).

The IMF last week forecast a slowdown of 3% for the Bulgarian economy in its worst-case scenario.

Capital Economics said Eastern Europe’s gross domestic product would decline by -6% on average this year, with a record -15% expected in Latvia and Lithuania. Poland, the region’s largest economy, is seen shrinking by 3% despite the optimistic forecast of its Government.