site.btaEuropean Commission Raises Bulgaria Economic Growth Forecast for 2018 and 2019

Brussels, May 3 (BTA) - The European Commission expects real GDP growth in Bulgaria to reach 3.8% in 2018 before tapering off to 3.7% in 2019, according to the Commission's Spring 2018 Economic Forecast which was published on Thursday. This implies an improvement on the Winter 2018 Forecast, in which the projections were 3.7% and 3.5%, respectively.

In 2017, the Bulgarian economy grew by 3.6%, the Commission recalled.

It predicted that BulgariaТs economy is set to continue growing robustly. Domestic demand is expected to be the main growth driver, while the contribution of net exports is set to remain negative. Risks to the growth forecast are broadly balanced. On the upside, higher wages and employment growth could translate into higher demand. The main downside risk comes from the external environment, given the openness of the economy.

Inflation in Bulgaria is expected to continue increasing this year as a result of strong private demand, the Commission said. Positive labour market trends will continue, with robust wage increases and rising employment, the Commission said. Public finances are projected to remain sound, supported by the favourable macreconomic environment and despite increases in public investment and wages.

Inflation will rise from 1.2% in 2017 to 1.8% in 2018 and will remain at the same level in 2019 due to increasing purchasing power of households, rising administrative prices and higher energy prices than last year.

The strong labour market recovery continued in 2017, with employment growth rising by 1.8% and the employment rate returning to its pre-crisis high of 64.3%. This was supported by positive developments in economic activity. Employment growth, however, is expected to ease in 2018 and 2019 due to labour supply limits. The unemployment rate is forecast to continue falling from 6.2% in 2017 to 5.5% in 2018 and 5.3% in 2019.

In 2017, Bulgaria's general government surplus widened further to 0.9% of GDP, mainly due to significantly lower-than-planned public investment. A fiscal surplus of 0.6% of GDP is expected in both 2018 and 2019, the Commission said.