European Commission raised its forecast for economic growth of Bulgaria

European Commission (EC) raised its forecast for economics growth of Bulgaria to 3.1% in 2016, against the forecasts released previously for GDP growth of 2%. In 2017, the EC analysts see slight slowdown in the momentum of the economy and growth of 2.9%, but also revised upwards against 2.4% forecasted earlier. In 2018, the GDP growth of Bulgaria is expected to slow more to 2.8%.

European Commission reduces expectations for unemployment in Bulgaria this year to 8.1% against the previous forecast for 8.6%. More favorable is the forecast for the budget deficit, which is expected to be 0.9% of GDP, against the previous expectations for 1.1% of GDP. In 2017, the EC believes that Bulgaria’s deficit will shrink additionally to 0.8% from GDP.

The European Commission warns that deflation in Bulgaria will deepen and will reach 0.9% in 2016, but the CPI will return to growth in 2017. The forecast for debt is more pessimistic, as currently the EC assess the Bulgarian debt to 29.4% from GDP.

EC warns that deflation in Bulgaria will deepen and will reach 0.9 percent this year before going out of positive territory in 2017 forecast the debt is also more pessimistic compared with May. Now expected to rise to 29.4 percent of GDP this year, instead of less than 28%, as was the previous forecast.

Expectations of the Commission are private consumption is a key driver of economic growth in Bulgaria. For this year it expects domestic demand to contribute most to growth compared to exports. Growth in private consumption is expected to reach 3.2%, while investment is believed will shrink by 0.8% due to delayed absorption of EU funds in the new programming period.

Expectations of the European Commission are private consumption to remain the key driver of economic growth in Bulgaria, as the domestic demand to contribute more to growth than exports. Growth in private consumption is expected to reach 3.2%, while investment is believed to shrink by 0.8% due to delayed absorption of EU funds in the new programming period. The European Commission’s expectations are investments to accelerate growth to 3.2% in 2017 due to launching of more European-financed projects.

The EC stressed in its report that risks to the Bulgarian economy are balanced. The main domestic risk is the slow absorption of EU funds. Regarding the external risks, the main is weak demand for Bulgarian exports from the leading external partners in Europe, as well as the possible increase in oil prices.

In the budgetary sphere revenues are expected to continue to improve in 2017 amid positive macroeconomic development. However, it is expected to continue the growth of public spending mainly due to increased capital expenditures. EC believes that this tendency will be sustained in 2018.

Concerning the European Union and Eurozone, the EC forecasts for economic growth of 1.8% and 1.7% in 2016. For the next year, will be observed slight slowdown to 1.6% and 1.5%. The report stresses that the EU economic recovery is uneven and there is serious differences between countries. The expectations are for more significant recovery of investment in 2018, due to the “Plan Juncker”.

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