site.btaEuropean Commission Edges Down Forecast for Bulgaria's Economic Development in 2018

Brussels, February 7 (BTA) - The European Commission Wednesday published its winter 2018 economic forecast where it edged down Bulgaria's expected real GDP growth for 2018 to 3.7 per cent, and for 2019, to 3.5 per cent, from previous estimates of 3.8 per cent and 3.6 per cent respectively.

The EC notes that Bulgaria's economic growth remains strong. Real GDP growth in 2017 is estimated at 3.8 per cent, driven by both consumption and investment. Higher consumption was fuelled mostly by strong wage increases linked to tighter labour market conditions and to public sector wage increases. Investment recovered, especially in the public sector, as the implementation of EU-backed investment programmes supported government capital expenditure. Net exportsТ contribution to GDP growth turned negative, as imports grew faster in response to higher domestic demand and export growth slowed down, following a very strong performance in 2016.

GDP growth is forecast to remain robust at 3.7 per cent in 2018 and 3.5 per cent in 2019. The main engine of growth will continue to be strong domestic demand, while the external sector's contribution is expected to turn positive only in 2019. EU funds are set to further boost public investment in 2018, while increases in wages should continue to stimulate private consumption. Both investment and private consumption are expected to remain the main drivers of growth in 2019.

Inflation, which has been negative for three years, turned positive and reached 1.2 per cent in 2017, mainly as a result of higher energy and commodity prices, as well as higher administrative prices for utilities. Over the forecast period, inflation is projected to gradually increase, rising to 1.4 per cent in 2018 and 1.5 per cent in 2019. This is mainly due to the global oil prices, which are assumed to continue pushing upwards energy prices, but at a declining rate.

At the same time, core inflation is expected to rise as the growth in household disposable incomes, fuelled by positive labour market developments, boosts private demand.