Bulgaria's recovery will be accompanied by weak domestic demand and strong exports in 2011, according to analysts of Raiffeisenbank Bulgaria and Greek EFG Eurobank.

The rise in household deposits at the end of 2010 amid almost unchanged nominal incomes probably means that the expected improvement in consumption in the last quarter of the year did not happen, Raiffeisenbank's analysts said.

According to the bank's chief economist, Kaloyan Ganev, the latest data confirm that the economy is recovering at a slow pace.

"The lack of income growth in times of accelerating inflation continues to weaken the purchasing power of households," he said.

"Saving in banking deposits and other profitable assets will continue to be attractive to households as a means to offset the decline in real income," Ganev added.

Meanwhile, EFG Eurobank's experts consider that the main factors hindering the rapid recovery in consumption are the still tightened credit conditions for households, the high unemployment and increasing inflation.

"That is why households are cautious when it comes to spending," the analysts said.

At the same time, the improving sentiment of both consumers and businesses is a positive sign for the future development of domestic demand. The experts also predict that the country will register economy growth of 2.5% in 2011 thanks to the rebound in exports.