site.btaBetter Absorption of EU Funds, Structural Reforms in Important Sectors and Drop of Fuel Prices Will Preserve GDP Growth - Expert

Better Absorption of EU Funds, Structural Reforms in Important Sectors and Drop of Fuel Prices Will Preserve GDP Growth - Expert


Sofia, January 12 (BTA) - The better absorption of EU funds and
the acceleration of structural reforms in some important
sectors, combined with a drop of fuel prices and abandonment of
aggressive restriction of fiscal policy in 2015 will suffice for
 the GDP growth to preserve its 2014 restoration rates,
Kristofor Pavlov, UniCredit Bulbank Chief Economist, notes in
his annual analysis of BulgariaÒs economy.

The past 2014 proved best for the labour market since 2008, the
powerful resumption of exports in 2013 subsequently influencing
the number of employed in the sectors oriented towards demand
abroad, the report finds. However, the suspension of European
funds, the crisis in Ukraine and the skipping of important
structural reforms had a negative effect in 2014. Political
insecurity and a crisis in the segment of banks with Bulgarian
owners, which are expected to lead to an additional slowing of
the revitalization rates at the end of 2014 and the beginning of
 2015, were added to that.

 The lack of well-prepared projects continues to be a problem in
 the absorption of European funds, in spite of the fact that a
considerable portion of the initial delay has been overcome,
Pavlov thinks. After the October 2014 elections the conditions
for implementing unpopular measures seems more favourable and
Bulgaria is on the way to make progress in some long-delayed
structural measures, the analysis says.

 The delay of credit in 2015 will be smaller than most external
analysts think as the capacity of offering services on the part
of Bulgarian banks is improving and the delay in offering
credits by the segment of Bulgarian private banks will be
compensated by the foreign banks. Lower interest on deposits and
 the decrease of deflation impact will dampen part of the
incentives for saving, which will lead to higher investments of
business and household consumer expenses, Pavlov forecast. 

 In 2015 the budget provides for a 0.6 per cent shrinking of the
 GDP deficit, mainly be a reduction of current expenditure.

In spite of the forecasts for a weaker euro, in 2015 we should
not expect higher rates of revitalization of exports because the
 economies of Bulgaria's main EU trade partners continue are
still very slow in returning to normal. The drop in oil prices
will have a positive effect on both GDP growth and the balance
of payment, Pavlov forecast.
   
According to the Chief Economist of Bulbank, the reduction of
prices will continue in 2015 and he expects a minus 0.5 per cent
 average inflation for the year. Lower oil prices are expected
to reduce the trade deficit by some 400 million euro or 1 per
cent of GDP, which will contribute to a positive current account
 balance again at the end of 2015, or 2.8 per cent of GDP for a
third year in a row.
   
According to Pavlov, the restoration of the labour market, which
 began in the middle of 2013, has gathered momentum in 2014 and
will continue in 2015, albeit at lower rates.