EC cuts Bulgaria's real GDP growth forecast to 0.5% in 2013, 1.5% in 2014

By bne IntelliNews November 5, 2013

The European Commission cut its projections for Bulgaria's real GDP growth to 0.5% in 2013 and 1.5% in 2014. The latest projections, part of the EC's Autumn Forecast, were revised down from 0.9% and 1.7% respectively in the spring edition of the forecast. Both estimates are slightly below the Bulgarian government's outlook for the period, according to which economic growth will be 0.6% this year and 1.8% in 2014.

In the first half of 2013, Bulgaria registered a mild economic expansion of 0.25%, driven by net exports and increasing public expenditure, while household consumption contracted. The restructuring of the economy towards the export sector is expected to lessen in the second half of the year. Instead, growth will be promoted by strengthening private consumption, as indicated by the rise in retail trade in July and August.

According to the EC, a rise in activity by end-2013 will render positive effects in 2014 as well. In the next couple of years, growth will be support by higher household consumption and private investment, the Commission said. This forecast assumes that the slight improvements in the labour market achieved so far will be sustained over the coming years.

The main downside risk to the forecast is related to the household consumption, which may prove weaker than expected due to fragile labour market and lower propensity to consume.

Unemployment is expected to be 13% in 2013, with the prospect of decreasing to under 12% by 2015.

Inflation is seen averaging 0.5% in 2013 but price growth will slightly accelerate to 2% in 2015 as the base effects from the currently low energy prices fades off.

  Spring Forecast'13 Autumn Forecast'13
  2013 2014 2013 2014
GDP (%, y/y) 0.9 1.7 0.5 1.5
   private consumption 1.4 2.5 -0.3 1.3
   public consumption 3.3 3.3 3 2.2
   gross fix cap. formation 3 3.1 2.1 2.4
Exports (%, y/y) 2.8 4.5 4.9 3.4
Imports (%, y/y) 4.3 5.8 4.1 3.7
HCPI 2 2.6 0.5 1.4
Unemployment 12.5 12.4 12.9 12.4
CA balance, % of GDP -2.6 -3.6 0.3 0
General budget balance, % of GDP -1.3 -1.3 -2 -2
Source: EC        

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