site.btaBulgaria's GDP Could Grow by over 3% in 2021, 4-5% in 2022, If Vaccination Campaign Progresses Well - IME Economist

Sofia, March 11 (BTA) - In an interview for BTA, Institute for
Market Economics (IME) senior economist Petar Ganev forecasts
that in a good-case scenario, if in the summer Bulgaria has made
 significant progress with the COVID-19 vaccination campaign,
thus removing concerns over a new shutdown of the economy in
autumn, the country's GDP could grow by some 3 per cent in 2021
and even by 4 to 5 per cent in 2022. In a bad-case scenario, a
new shutdown, albeit a partial one, in the autumn due to a slow
vaccination campaign, emergencies caused by new coronavirus
strains or low vaccine efficacy, would continue to suppress the
potential of the Bulgarian economy.
   
According to preliminary data of the National Statistical
Institute, last year's real GDP decreased by 4.2 per cent from
2019, Ganev says. He recalls that in mid-2020, the state budget
was updated and the Government expected a GDP drop of 3 to
slightly over 3 per cent in the best-case scenario, while the
central bank's forecast was gloomy: a drop of up to 8 per cent.
At the end of 2020, however, most institutions rallied around
the expectation of a 4 per cent GDP drop. The economist notes
that there are worse examples in Europe, with some southern
countries hit harder by the pandemic experiencing a 10 per cent
drop. In his words, the big question is how the economic
recovery will look like and whether Bulgaria will manage to
create jobs, because in most areas the unemployment rate has
increased by some 2 percentage points.

According to Ganev, Bulgaria sits relatively well among the EU
Member States in the one-year period of living in a pandemic.
This is because, on the one hand, this country was not hit so
hard by the first wave of COVID-19 in March-April 2020 and
Bulgaria's industry has not been quarantined, unlike Italy's; it
 was rather Bulgarians' social life that was affected by the
resrictive measures. Also, the most dynamic sector in
information technologies as well as digital services even
managed to create jobs and register growth, Ganev adds.

According to various experts' estimates, the EU Member States
have set aside 10 per cent of their GDP on average in support of
 businesses and people affected by the restrictions, Ganev says
and notes that in Bulgaria, if the bank moratorium is also taken
 into view, this percentage could be even higher. He sees this
loan repayment moratorium as the most important measure that has
 allowed a huge monetary resource to not be paid back, thus
reducing the liquidity pressure on enterprises and households.

From a macroeconomic point of view, Ganev sees as the
Government's most effective measures the bank moratorium because
 of the reduced liquidity pressure, the 60/40 job retention
scheme because of the reduced flow to employment offices, as
well as the liquidity support under operational programmes
despite these not covering such a significant part of
enterprises.

Unlike other countries with huge deficits who took quite bigger
anti-crisis measures than Bulgaria's, the budget of Bulgaria was
 in a very good shape last year, the economist argues. There
were surpluses that in late December 2020 the Government let
itself spend in one form or another. A deficit was created that
this year has been set at around 5,000 million leva, but this is
 a manageable deficit against the backdrop of Bulgarian economy
and, to some extent, the current crisis. In Ganev's words, if
this country continues to hold the budget's reins and the
economy recovers this year as expected, Bulgaria should very
quickly consolidate the framework and get in shape.

He adds that in the coming years, Bulgaria should get a
significant financial resource from the EU under the Recovery
and Resilience Facility to be used for public investments and
support of businesses. A big loan has been taken to cover the
2020 and the 2021 deficits but given the low levels of
government debt, Bulgaria's government debt will remain at a low
 level towards the end of this year, Ganev forecasts. As a
whole, the State is in good shape in terms of budget, he
concludes.
 
NV/DS