site.btaEuropean Commission Projects Moderate Economic Growth for Bulgaria in Spring Forecast

European Commission Projects Moderate Economic Growth for Bulgaria in Spring Forecast

Brussels, May 3 (BTA) - The European Commission projected moderate economic growth for Bulgaria in its spring forecast. The GDP is expected to drop to 2 per cent in 2016, as some boost factors, such as the absorption of EU funds weaken. GDP growth is set to recover to 2.4 per cent in 2017 as strengthening domestic demand more than offsets fading net exports.
 
Growth in 2015 was stronger than in 2014 mainly because of higher net exports, but domestic demand is expected to increase and replace net exports as the main growth driver in 2017. Private consumption growth is expected to strengthen from 0.8 per cent in 2015 to 2.0 per cent in 2016 and to 1.7 per cent in 2017. The slowdown of the implementation of projects co-financed by the EU is still set to supress investment in 2016-17, the Commission says. In general, risk aversion, an unsupportive business environment and restrained foreign capital inflows are also expected to weigh on investment growth.

Exports are projected to grow faster than imports over the forecast horizon, supported by higher demand from the EU, resulting in positive contributions of net exports to growth.

Overall, risks to the growth outlook appear balanced. On the positive side, stronger employment growth and slower weakening of exports could fuel stronger-than-forecast private consumption and investment. Also, some economic sectors could receive stronger-than-projected support from low interest rates and oil prices. Geopolitical uncertainties and weak import demand of the main trading partners could, however, pose a downside risk to exports and output growth, given the high degree of openness of the economy.

Employment growth is projected to marginally increase from 0.3 per cent in 2016 to 0.5 per cent in 2017, supported mainly by the recovery in domestic demand. Together with the expected decrease in the labour force due to population aging and emigration, this is likely to further reduce the unemployment rate to 8.6 per cent in 2016 and 8.0 per cent in 2017.

The Commission also projects a gradual decrease of the general government deficit.