IMF Raises Bulgaria’s 2012 Growth Forecast to 1.0%, Sees GDP Up 1.5% in 2013

IMF Raises Bulgaria’s 2012 Growth Forecast to 1.0%, Sees GDP Up 1.5% in 2013

The International Monetary Fund (IMF) raised its forecast for Bulgaria's 2012 economic growth to 1.0% from 0.8% projected in May, to reflect stronger domestic demand arising from the use of EU structural funds.

The IMF expects Bulgaria's economic growth to accelerate to 1.5% in 2013 as the external environment recovers in the second half of the year and exports pick up, IMF mission chief for Bulgaria Catriona Purfield said at a news conference in Sofia on Tuesday.

The IMF team visited Sofia from September 20 through October 2 to discuss recent economic developments and policies with the local authorities.

Headline inflation is expected to average 2.5% in 2012, largely reflecting higher food and fuel prices. The 2012 fiscal cash deficit is on track to fall to 1.25% of GDP, which IMF sees as a substantial progress towards the 2015 target of a balanced budget.

"Targeting an unchanged budget deficit in 2013 would preserve the credibility of this adjustment that resulted in lower yields on government debt. Within a tight budget envelope it will be necessary to resist pressures for generalized wage increases. Any over performance should be used to boost the fiscal reserve given the temporary impact of the July eurobond issue. However in the event there were to be a severe downturn, the deficit should be allowed to adjust to the economic cycle," the IMF said in a statement issued after the press conference.

Bulgaria issued a 950 million euro ($1.2 billion) five-year benchmark eurobond in July to provide finances for repaying a global bond maturing next year.

IMF also said it expects unemployment in Bulgaria to stand at 12% this year and remain mostly unchanged in 2013.

"Boosting growth and employment will require bolder structural reforms. Higher capital spending (e.g. basic infrastructure) funded by better absorption of EU funds would stimulate growth and tackle infrastructure gaps," IMF said.

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