site.btaWorld Bank Slightly Lowers Estimates for Bulgaria's Economy Growth in 2023

Bulgaria's economy is expected to significantly slow down its growth rate this year (1.4%), in line with the continued cooling of the Eurozone economy. Growth could even be further depressed if Sofia fails to meet key reform milestones under the National Recovery and Resilience Plan, which would lead to further delays in upcoming tranches, according to the World Bank's latest report titled "Fall 2023: Sluggish Growth, Rising Risks", which examines the economic outlook for countries in Europe and Central Asia.

In its spring forecast, the World Bank expected that the Bulgarian economy would grow a little more this year, by 1.5%.

Inflation in Bulgaria will continue to decrease, but will remain high in 2023. This would put at risk the goal of this country joining the Eurozone in 2025, according to World Bank experts.

The annual growth of consumer prices in this country is estimated to be 9.8% in 2023, and next year it will go back down to 5.6%, and then to 4.2%  in 2025, according to the estimates of the international institution.

The government's fiscal deficit target of 3% for the current year is achievable, but may come at the expense of lower-than-planned capital spending. This could harm future growth prospects, the report's authors warn.

Bulgaria's current account balance is projected to shift to a slight surplus in the period 2023-2025 due to the expected downward correction in the prices of key imported raw materials and the increase in the country's net export of services.

Political risks have decreased significantly after the formation of a regular coalition government in June 2023, the World Bank said. The new government's priorities include speeding up the implementation of the National Recovery and Resilience Plan, as well as preparing the country for accession to the Schengen area and the Eurozone in the near future.

However, the upcoming local elections at the end of October may increase the pressure on the ruling coalition and political uncertainty may escalate again, the World Bank warns.

Given the slowdown in growth and potentially persistent inflation, poverty (using the poverty line of USD 6.85 per day) is expected to continue to decline slowly, reaching 3.5% in 2023, as projected in the spring World Bank report.

The data from the report also indicate that in 2023 Bulgarian exports will decrease by 2.7% on an annual basis, after having gone up by 8.3% in 2022. In the coming years 2024 and 2025, however, a recovery of exports is expected, and growth is estimated by 5.7% and 6.6%, respectively.

Exports of Bulgarian goods and services to the EU decreased by over 5% in the first half of this year on an annual basis, reflecting a 7.8% drop in exports to the Eurozone, which is the destination for almost 45% of Bulgarian exports. the experts of the World Bank state.

Imports into the country are estimated to decrease by 3% this year, after which they will increase by 6.5% and 7.8% in the next two years, according to the estimates of the World Bank.

Also, the net inflow of foreign direct investment, expressed as a percentage of the country's gross domestic product, is expected to be 1.8% this year, 2.6% next year, and 2.9% in 2025.

In 2023, budget revenues should reach 39.5% of Bulgaria's GDP, according to World Bank forecasts. Over the next two years, they are estimated to increase to 40.6% of GDP in 2024, and 41.3%of GDP in 2025.

Government debt as a percentage of GDP is also projected to go down to 22.5% in 2023, then rise to 22.7% next year and decline back to 22.1% in 2025.