By Marc Jones
FRANKFURT, Nov 19 (Reuters) - Bulgaria's economic growth forecast for 2009 is likely to be cut as the global downturn hits demand, Deputy Prime Minister Meglena Plugchieva said on Wednesday.
Economic growth in the European Union's poorest nation slowed from 7.1 percent to 5.6 percent in the last two quarters. The government has forecast growth of 4.7 percent for 2009 but most economists expect the gathering pace of the global downturn to push it down to below 3 or 4 percent.
Asked whether the government would have to cut its 2009 growth forecast, Plugchieva told Reuters on the sidelines of a conference: "Probably yes but at the moment I cannot say for sure."
She added the country had not been seriously affected by the financial crisis but said the government had to keep a close eye on whether foreign-owned banks in the country had started to rein in lending.
"It is not to be excluded but at the moment there are no problems with credit for people and companies," she said.
"But the banks are 90 percent owned by foreign banks, so we have to be very careful to see what kind of influence we see from the parent banks."
Bulgarian consumers are feeling the pinch of the global financial crisis while exporters are being hit by slowing demand from major European economies as they themselves fall into recession.
Plugchieva, who is responsible for channelling EU funding, said that while the slowdown was hurting economic growth, the upside was that it was helping curb inflation.
"We expect inflation to reduce next year but it is not very easy to say where to. It's very difficult to say at the moment because of the economy," she said.
Inflation has hit double-digits in the past year due to strong domestic demand and high food prices. It is currently running at 10.9 percent and Plugchieva said she expected it to be around 8 percent by the end of the year. (Reporting by Marc Jones; Editing by Victoria Main)