World Bank cuts Bulgaria's 2021 GDP growth forecast to 2.6%

World Bank cuts Bulgaria's 2021 GDP growth forecast to 2.6%

The World Bank said it expects Bulgaria's gross domestic product (GDP) to grow by 2.6% in 2021, cutting its January projection by 0.7 percentage points.

Bulgaria's economic output is estimated to have shrunk by 4.2% in 2020, compared to a 5.1% decrease projected in January, as private consumption bounced back strongly in the third quarter, the World Bank said in the spring edition of its Europe and Central Asia Economic Update report published on Tuesday.

"Economic performance in 2020 was largely driven by the waves of domestic containment measures. [...] Yet, with Bulgaria recording the slowest pace of vaccination in the EU - just 4.4% of the population vaccinated until March 11 - economic activity is not likely to return to normal before the autumn of 2021," the World Bank noted.

On Wednesday, Bulgaria hit a new record in daily registrations of Covid-19 cases - 5,176, bringing the total number since the outbreak of the pandemic to 338,426. Over 458,700 doses of coronavirus vaccines were administered as of Wednesday, according to health ministry data.

According to the World Bank's baseline scenario for Bulgaria, the country will reach its pre-crisis level of real output in 2022. GDP is forecast to grow by 3.4% in 2023.

The World Bank explained that the baseline scenario assumes that vaccination in Bulgaria will gain momentum in the second and third quarters of 2021, which will gradually help restore consumer and business confidence. With expectations of reduced infection rates in the summer and increased inoculation in Bulgaria’s main market, the EU, exports of goods are likely to recover but tourism is expected to remain below pre-crisis levels.

Aside from the pandemic-related challenges, the upcoming general elections on April 4 also add to the uncertainties.

"Swift formation of a new government would be a prerequisite for the smooth continuity of fiscal response measures and the restoration of investor confidence as vaccination gains momentum. Delivery on the fiscal consolidation plans also hinges on the outcome of election," the World Bank said.

Bulgaria's inflation is expected to reach 3.2% in 2021 before accelerating to 3.3% and 3.4% in 2022 and 2023, respectively, according to the report.

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