site.btaBulgarian Academy of Sciences Projects 2% GDP Growth, Zero Inflation in 2016

Bulgarian Academy of Sciences Projects 2% GDP Growth, Zero Inflation in 2016

Sofia, May 30 (BTA) - The GDP growth in 2016 is expected to be around two per cent, Assoc. Prof. Viktor Yotsov from the Bulgarian Academy of Sciences' (BAS) Economic Research Institute told a BTA-hosted news conference Monday.

GDP growth in 2015 was around three per cent, which is relatively high, but was largely due to the increased use of EU funds, which inflated it artificially, he said.

The Institute expects zero inflation this year and an employment increase of one per cent. Deflation for third consecutive year is possible, however, that would become clear no earlier than this fall, Yotsov noted, adding that a budget surplus can be expected no earlier than 2018.

GDP growth in 2015 was export-driven, but it merely reached its past levels. "Back in the day we had what to export but did not have the markets. Now there are markets, but we do not have what to export," the economist said. The foreign markets will not be a sustainable factor for Bulgaria's economic growth in the mid- and long-term, because the economic growth in developing countries has slowed down, Yotsov explained.

According to BAS, the economic inequality has been on the rise in recent years with one of the reasons being the predominant use of indirect, rather than direct taxation. Bulgaria has low tax rates, which is not a bad thing, but at the same time people want the State to play a bigger role in the economy, the expert said, explaining that this would be impossible and one of the two paths must be chosen. Around 40-41 per cent of Bulgaria's GDP is distributed through the budget, which is relatively low compared to the EU average of 48-49 per cent. Spending on education and health care is relatively low in this country, while it ranks first in terms of security spending as a percentage of GDP, Yotsov noted.