17.11.2022

THE EC PREDICTS HIGH INFLATION AND STABLE UNEMPLOYMENT FOR BULGARIA

The growth of the Bulgarian economy will reach only 3.1 percent in 2022, slowing down even more to 1.1 percent next year. This is stated by the European Commission in its autumn forecasts, published during the week.

Last year, the economy of our country grew by 7.6 percent after shrinking by 4 percent in the pandemic year 2020.

According to the EC's summer forecasts, published in mid-July, expectations for Bulgaria have improved for the current year (a growth of 2.8 percent was expected in the summer), but the prospects for next year have worsened (a growth of 2.3 in the summer forecasts).

For 2024, the European Commission is betting on a growth rate of our gross domestic product (GDP) of 2.4 percent.

Inflation forecasts in the country point to a rate of 12.8 percent in 2022 and a slowdown to 7.4 percent next year, followed by 3.2 percent in 2024. Inflation expectations are relatively little changed, albeit in the upward direction, compared to the summer forecasts (12.5 percent and 6.8 percent for this year and next year, respectively).

Unemployment in Bulgaria will remain stable, maintaining a level of 5.2 percent in 2022 and 2023 and with a minimal increase to 5.3 percent in 2024 with employment dynamics of 0.4 percent, 0.0 percent and 0.2 percent in the three years covered by the autumn forecasts.

For comparison, the baseline scenario in the forecast of the Bulgarian National Bank (BNB), prepared as of September 30, 2022, foresees a lower growth of Bulgaria's real GDP - a slowdown to 2.8 percent in 2022 and to 0.1 percent in 2023, then accelerating to 3.4 percent in 2024.

Our central bank's estimates for annual inflation foresee a level of 14.9 percent at the end of 2022, 7.6 percent next year and a weakening to 3.4 percent at the end of 2024. The unemployment rate is expected to decline steadily from 4.6 percent in 2022 to 4.2 percent in 2024.

Regarding the financial flows of our country, the European Commission expects in its autumn forecast a budget deficit of 3.4 percent of GDP this year, which will decrease to 2.8 percent and 2.5 percent in the next two years, respectively.

Government debt is projected to decline slightly to 22.5 percent of GDP this year and gradually increase to levels of 23.6 percent and 25.6 percent in 2023 and 2024, respectively. The country's government debt last year was 23.9 percent and 24.5 percent in the pandemic year 2020.

For the current account balance, Brussels forecasts a deficit of 1.2 percent this year, with the negative balance increasing to 3 percent and 3.2 percent in the next two years.

The forecast for total investments in 2022 is also negative - minus 8 percent, but with a positive balance of 5.5 percent and 7 percent in 2023 and 2024, respectively.