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European Commission Macroeconomic Spring Forecast Expects Bulgarian Economic Growth to Remain Stable

08.05.2019

The European Commission expects the Bulgarian economy to grow from 3.1% in 2018 to 3.3% in 2019 and 3.4% in 2020. According to the Commission, domestic demand will remain a key GDP growth factor over the entire forecast period, even though at a slower pace compared to 2018, due to more moderate private consumption. Investment is projected to remain strong.

The Commission expects exports to recover in 2019, as the one-off effects of 2018 dwindle, even if the subdued demand from major trading partners continues to weigh on the exports. According to the Commission, risks to the growth forecast are broadly balanced. A higher growth could be expected if private consumption grows faster than expected, provided that the labour market tightens further and consumers’ confidence improves. The main downside risk is the possibility of a sharp contraction in major export markets.

The Commission expects inflation to decline to 2.0% in 2019 and 1.8% in 2020, with energy sector hikes in 2018 expected to gradually dissipate.

The Commission’s expectations about the labour market remain favourable. Employment growth is projected to reach 0.1% for 2019 and 2020, with the unemployment rate continuing to decline until reaching 4.8% in 2020.

The Commission takes account of the strong fiscal stance in 2018 when the general government surplus rose to 2% of GDP. The Commission expects the budget balance to remain positive in the coming years, but to narrow to 0.8% of GDP in 2019 and to reach 1% of GDP in 2020. Public investment financed either by EU funds or national resources is set to be the main driver of budgetary developments.

The trend of diminishing public debt is preserved and it is forecast to drop to 18.4% of GDP by 2020.

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