EU Commission cuts Bulgaria's 2021 GDP growth projection to 3.8%

EU Commission cuts Bulgaria's 2021 GDP growth projection to 3.8%

The European Commission has lowered its economic growth forecast for Bulgaria in 2021 to 3.8% from 4.6% predicted in July, it said on Thursday.

"In the first half of 2021, the economic recovery in Bulgaria was held back by high economic uncertainty and containment measures. Investment and services exports remained supressed, while domestic consumption and goods exports contributed positively to aggregate demand. These two factors, combined with the implementation of the Recovery and Resilience Plan, are set to boost economic growth in the next two years," the Commission said in its Autumn 2021 European Economic Forecast report.

The Commission said it sees Bulgaria's gross domestic product (GDP) growth accelerating to 4.1% in 2022 and remaining strong at 3.5% in 2023. The country's GDP shrank by 4.4% last year.

"Recent hikes in energy and food prices are set to erode the purchasing power of low-income households," the EU's executive body added. "The new introduction of the COVID-19 certificate may prove insufficient to contain infection rates and adjustment to the new normal may take longer. In addition, the impact of higher energy prices on headline inflation and consequently on private consumption may be stronger than expected."

Bulgaria's consumer price inflation is expected to accelerate to 2.4% in 2021 and 2.9% in 2022 before slowing down to 1.8% in 2023 as the second-round effects of high energy prices are expected to dissipate.

Regarding unemployment, Bulgaria's rate has stabilised at around 5.5% since June 2020, set to gradually decline to 4.6% in 2022 and 4.4% in 2023 due to the favourable economic outlook. Growth of wages is also expected to remain strong at 9% in 2022 and 7.9% in 2023.

Bulgaria's general government deficit is projected at 3.6% of GDP in 2021, with the improvement from the previous year’s deficit of 4% of GDP mainly due to statistical corrections in 2020 general government accounts. It is set to go down in 2022, to 2.8% of GDP, and further in 2023, to 2.1%.

General government debt is expected to be around 26.7% of GDP in 2021 and remain around that level thereafter, the report showed.

Private consumption is seen rising by 6% in 2021, 3% in 2022 and 3.4% in 2023, after shrinking 0.4% last year. Public consumption, which grew by 8.3% in 2020 is forecast to decrease by 1% in 2021 and then rise 0.5% in 2022, followed by a fall of 0.9% in 2023, the Commission said.

For the EU, the Commission is projecting economic growth of 5% in 2021, to be followed by 4.3% expansion in 2022 and 2.5% growth in 2023.

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