Economic growth in Bulgaria will be 0.6 per cent this year, down from 1.7 per cent in 2011, the World Bank has forecast in a report, making it the most pessimistic growth scenario for the country released so far.
By comparison, the official Government forecast is 1.7 per cent, while the Bulgarian National Bank has estimated growth at 0.7 per cent. The International Monetary Fund has recently revised its growth forecast to 0.8 per cent and the European Bank for Reconstruction and Development sees the economy growing by 1.2 per cent.
“Bad weather earlier this year, renewed tensions in euro area, capacity constraints in some countries and deleveraging by European banks” were the factors that would slow down growth in the Europe and Central Asia region, the World Bank said in its Global Economic Prospects report.
“Unlike other developing regions which are beginning to rub up against capacity constraints, the supply side was able to keep up with the strengthening of demand in the region, because many countries have yet to recover the output lost following the 2008/09 crisis,” the report said.
In Bulgaria’s case, in particular, industrial output was still 28 per cent lower than the long-term trend. Partially, it was the outcome of the fiscal tightening and weak import demand from high-income European countries, the World Bank said.
With economic growth slowing down in the second half of 2011, the carry-over from last year was weak in most countries of the region, but at its weakest in Bulgaria and Serbia, according to the report.
Bulgaria had the highest ratio of Greek-owned banking assets (23.7 per cent), but the fact that it was mostly subsidiaries of Greek banks (rather than branches) would allow “host country authorities to monitor and address the developments, although their effectiveness will depend on various factors including the health of the domestic and other foreign banks operating in their country,” the report said.
Bulgaria’s economy would rebound next year to 2.5 per cent growth and 3.3 per cent in 2014, the World Bank forecast.