The European Commission’s latest autumn economic forecast reveals Bulgaria’s anticipated economic slowdown in 2023 and 2024, followed by a predicted rebound in 2025. Projections indicate a decrease in imports and exports alongside steady household consumption levels, set to rise gradually in the coming months of 2024.
In its forecast, the EC suggests a weakening of Bulgaria’s Gross Domestic Product (GDP) growth to 2% in 2023, up from its previous forecast of 1.5%. For the subsequent year, the GDP expansion is anticipated to dip to 1.8%, a downgrade from the earlier estimate of 2.4%. In contrast, Bulgaria observed a 3.9% GDP growth in 2022.
Anticipating a recovery, the EC estimates a 2.6% increase in Bulgaria’s GDP until 2025. Regarding inflation, it’s projected to hover around 8.8% in 2023, easing to 4% in 2024 and further dropping to 2.9% in 2025.
Additionally, Bulgaria’s government deficit is expected to rise slightly in 2023 due to increased spending on pensions and wages. Although, measures aiming to enhance tax collection and dividends from state-owned enterprises are anticipated to mitigate this impact.
Looking ahead, the EC predicts the deficit to reach 3% of GDP in 2024 and 3.2% in 2025. Investments and public spending are expected to remain relatively stable, with EU funds contributing notably to Bulgaria’s economic recovery, particularly from the Recovery and Resilience Facility.
Despite the overall balanced risks to Bulgaria’s macroeconomic prospects, the EC warns of potential challenges arising from a tight labor market, delayed absorption of EU funds and the sluggish implementation of recovery mechanisms.
Notably, the IMF and rating agencies like Fitch Ratings have adjusted their growth forecasts for Bulgaria, echoing the EC’s sentiments of a short-term slowdown with optimistic projections for the following years.
While economic forecasts remain dynamic, Bulgaria’s trajectory indicates a period of cautious economic recovery in the years ahead, potentially mitigated by internal and external factors impacting its growth prospects. (Novinite/Business World Magazine)