SOFIA (Bulgaria), October 17 (SeeNews) – Bulgaria’s real economic growth will ease to just 0.1% in 2023, the country’s central bank said, slashing its already-lowered June forecast of 1.7% growth in gross domestic product (GDP) next year.
The economy will also grow at a slower rate in 2024 than forecast earlier, or by 3.4%, the Bulgarian National Bank (BNB) said in the latest edition of its quarterly economic review published on Friday.
In June, the central bank had projected Bulgaria’s GDP to grow by 3.7% in 2024.
Nevertheless, the BNB lifted its expectations for the country’s real economy to grow by 2.8% in 2022, against 1.9% seen in June. This was largely due to the stronger-than-expected performance of Bulgarian exports in the first half of the year coupled with higher demand from Bulgaria’s main trading partners despite the spillover effects of the war in Ukraine.
The expectations of feeble economic growth in the short to medium term were dictated by the increased likelihood of a worsened global macroeconomic environment in the latter part of 2022 and early 2023, the central bank noted.
Russia’s ongoing war on Ukraine, along with spiking energy and raw materials prices, short-term interest rate rises in the eurozone, concerns over potential natural gas shortages and pessimistic business climate were cited as the chief reasons for the downward revision of GDP growth in 2024.
In addition, the expected halt in the tendency to accumulate stocks of raw materials, components and finished products in the economy and the projected negative contribution of the change in inventories in the next year will also significantly limit real economic growth, BNB noted.
Economic activity in 2023 will mostly be supported by the expected absorption of funds under Bulgaria’s EU-backed National Recovery and Resilience Plan by both the private and public sectors.
The potential acceleration of GDP growth in 2024 is due to an assumed recovery in external demand and the expected acceleration of growth in final consumer spending as inflationary pressures weaken. However, there are risks for Bulgaria’s economy to perform below base scenario expectations in 2024.
The central bank’s base scenario forecast sees inflation in Bulgaria accelerating to 14.9% in 2022, up from the 14.7% projected in June. Consumer prices will grow on account of the cost for businesses of raw materials and labour, as well as due to imported inflation.
Average annual inflation is seen at up to 4.1% in 2023 before abating to 3.4% in 2024, the central bank added. In June, BNB projected inflation to be 3.8% at the end of 2023 and to slow to 3.1% in 2024.
Bulgaria’s consumer prices jumped 18.7% on the year in September, according to the latest data published by the statistical office on Monday.
Earlier this month, the World Bank slashed Bulgaria’s 2023 GDP growth forecast to 1.7%.
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