EU Commission Forecasts “Subdued Growth Amid Rising Uncertainty” for Bulgaria  

Bulgaria will experience with “subdued growth amid rising uncertainty” over the next two years, the European Commission said in its autumn economic forecasts on Tuesday.

Highlighting that “downside risks have materialised since the spring forecast” and “a  less dynamic external environment is weighing on exports”, the Commission projected that real GDP growth will fall from 1.2% in 2014 to 0.6% next year and 1.0% in 2016 mainly due to weakening domestic demand.

The deficit in Bulgaria’s general government budget is expected to deteriorate from 1.2% in 2013 to 3.6% of GDP this year and remain above 3.0% of GDP over the forecast horizon.

The general government gross debt is forecast to increase from 18.3% of GDP in 2013 to about 25.3% in 2014, 26.8% next year and 30.2% of GDP in 2016.

Following projected deflation of 1.4% in 2014, inflation in Bulgaria is expected to pick up to 0.4% next year and 1.0% in 2016, the European Commission forecast.

Looking at factors that will underpin growth in Bulgaria, the Commission said exports are set to resume increasing at a moderate pace over the next two years supported by a modest recovery in both the EU and non-EU trade partners of the country.

Consumption and investment outlook looks subdued, the Commission said.

Private consumption, which was supported in the first half of 2014 by a sharp increase in households’ real disposable income on the back of a rise in public sector wages and pensions as well as deflation, is expected to lose momentum next year.

EU-funded investment, driven by “buoyant government investment spending on the back of accelerated absorption of EU funds in 2014”, is set to decrease significantly in the coming years with the current programming period coming to an end.

Private investment is expected to fall further in 2014-2015, dragged down by “low profit expectations amid increased uncertainty”, the Commission said.

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