site.btaEC Revises Upwards Forecast for Bulgaria's Real GDP Growth in 2017 to 3.9 Per Cent

Brussels, November 9 (BTA) - The European Commission released Thursday its Autumn Forecast which showed that the euro area economy is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2 per cent, which is substantially higher than the forecast made in the spring (1.7 per cent). The EU economy as a whole is also set to beat expectations with robust growth of 2.3 per cent this year (up from 1.9 per cent in spring).

The forecast for Bulgaria says that the stable growth is supported by domestic demand. Bulgaria's economy is set to continue its steady growth, driven mainly by private and public consumption and a recovery in investment. Last year's significant contribution to growth from net exports is set to diminish this year, as imports grow faster than exports. Inflation, which had been negative for three years, has turned positive as a result of strong domestic demand. Unemployment is projected to continue falling, while wages grow strongly. In this favourable macroeconomic framework, the general government budget is expected to remain balanced and slowly turn into surplus, despite increases in public investment and public wages.

Bulgaria's real GDP growth in 2017 is expected to reach 3.9% following a good performance of the economy in the first half of the year and an upward revision to 2016's real GDP growth rate by 0.5 pps. Domestic demand is the main driver of growth with both private and public consumption projected to expand strongly in 2017. The contribution from investment is expected to turn positive, as investment slowly recovers from its 6.6 per cent drop in 2016. Net exports, which performed very well in 2016, are losing momentum as higher domestic demand is fuelling a rise in imports and exports are slowing down. The contribution from net exports to growth is forecast to be zero this year.

In 2018 and 2019, real GDP growth is forecast to gradually decline to 3.8 per cent and 3.6 per cent, respectively. Domestic demand is expected to remain the engine of growth. Private consumption growth is set to moderate, while investment should continue to boost the economy as the absorption of EU funds under the 2014-2020 EU programming period is expected to accelerate. The contribution to growth from the external sector is forecast to be only slightly positive in 2018 and 2019 as both export and import growth rates are set to slow. The negative output gap is projected to close in 2017 and turn positive thereafter, the EC autumn forecast for Bulgaria says.