site.btaGDP Grows More than Expected, Analyst Says

GDP Grows More than Expected, Analyst Says

Sofia, December 22 (BTA) - Bulgaria's gross domestic product (GDP) will grow more than the projected 2.7 per cent in 2015, Emil Kalchev, Macroeconomic Analyst with Raiffeisen Bank (Bulgaria), wrote in a study which was made available to BTA on Tuesday. This is due to very low or even negative inflation, low oil prices and cheaper money, despite the insecure external environment, Kalchev wrote.

Other drivers of economic growth are the excess of exports over imports and a moderate increase in domestic consumption, propelled by falling interest rates on bank deposits. Despite the growing government deficit, which is expected to account for 3.3 per cent of GDP in 2015 (according to the updated national budget), investments in the Bulgarian economy remain at a standstill, the analysis says. The expected rise in oil prices and the diminishing effects of the European Central Bank's policy of quantitative easing next year, occurring against the backdrop of shrinking public expenses in Bulgaria (with a government deficit projected at 2 per cent of GDP in 2016), will slow down GDP growth to 2.1 per cent in 2016, Kalchev wrote.

The promise that Bulgaria's capacity to absorb EU funding would increase in 2015 proved unrealistic, and expectations are that in 2016 it will remain below the average EU level, according to the study.

In 2015, the national banking sector overcame the problems which arose from the crisis at Corporate Commercial Bank in the second half of 2014 and the Greek financial crisis. The main challenge to Bulgarian banks in 2016 will be the forthcoming asset quality review and the stress tests which will be carried out by the middle of the year. Most Bulgarian banks are believed to be ready for the review, although some of them may find it more difficult to meet the standards, which can fuel the process of bank consolidation, Kalchev wrote.