Bulgaria aims to have a budget deficit of 2.5% of gross domestic product and a growth of 3.6% in 2011, according to a budget draft, cited by reports.

In June, the center-right cabinet revised the state budget increasing its 2010 target for deficit to 4.8% of GDP on a cash basis and 3.9% of GDP under EU accounting rules, far wider than initial estimates.

The center-right government dropped its plans for applying for ERM II after raising the alarm that the 2009 budget gap was 3.7% of gross domestic product rather than the 1.9 % due to unaccounted procurement deals.

Bulgaria's economy contracted by 3.6% on an annual basis in the first quarter of 2010 from 5,9% in the previous quarter, but the government hopes for a 1% economic growth for this year as recovering exports bolster the expansion.

Prime Minister Boyko Borisov's government previously estimated the economy would grow 0.3% after a 5.1% contraction in 2009 as investments dwindled and consumption shrank.

Economists are cautious in their forecasts for Bulgaria's economy and say it will remain in recession or be about zero this year.