European Commission’s autumn forecast for the EU economy, released on November 5, remains optimistic about the projected recovery from recession for the bloc as a whole in the second half of 2013. In Bulgaria’s case, however, the economic growth forecast was lowered to 0.5 per cent this year, compared to 0.9 per cent in the spring forecast and the 1.4 per cent projected in the 2012 autumn forecast.
The EU’s economy was expected to be flat this year, compared to the -0.1 per cent growth in the spring forecast, while the euro zone is still expected to shrink by 0.4 per cent. Last year, the EU’s economy is estimated to have decreased by 0.4 per cent and the euro zone by 0.7 per cent.
Internal and external adjustment in Europe is continuing, underpinned in many cases by the significant structural reforms and fiscal consolidation implemented in recent years. This has improved the conditions for domestic demand to gradually become the main engine of growth in Europe, the European Commission said.
The autumn forecast estimated economic growth at 1.4 per cent in the EU as a whole and 1.1 per cent in the euro zone in 2014 (largely unchanged from the spring forecast, when the Commission set its sights on 1.4 per cent and 1.2 per cent growth, respectively.)
Since labour market developments typically lag those in gross domestic product by half a year or more, the recovery of economic activity is expected to translate only gradually into job creation.
EU member states were making progress in reducing external and internal imbalances, but the recovery was seen as too slow to make a serious impact on unemployment, which in turn was expected to weigh on private consumption.
“The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery. But it is too early to declare victory: unemployment remains at unacceptably high levels. That’s why we must continue working to modernise the European economy, for sustainable growth and job creation,” European economic and monetary affairs commissioner Olli Rehn said.
“In view of the protracted recession, we must do whatever it takes to overcome the unemployment crisis in Europe,” economic and monetary affairs commissioner Olli Rehn said in the statement.
In Bulgaria’s case, after a marked drop in employment over the past four years, the situation in the labour market seems to be stabilising in 2013.
This is mainly the result of developments in the traditionally volatile agricultural sector, reflecting a good harvest in 2013, but employment in other sectors of the economy also appears to be stabilising, the EC said. Unemployment is expected to peak at almost 13 per cent of the labour force in 2013 and decline slowly to below 12 per cent by 2015.
“Economic activity is projected to strengthen over the forecast period, reaching 1.5 per cent in 2014 and 1.8 per cent in 2015. Household consumption and private investment are expected to increasingly contribute to growth, after an extended period of rebalancing following the economic crisis,” the EC said in its country forecast.
The most significant downside risk is related to the expected recovery in household consumption, which could prove weaker than expected given that the Bulgarian labour market and household sentiment are still fragile. However, as observed over the recent years, in periods of weaker domestic demand the Bulgarian economy has been able to partly compensate with higher exports and gains in global market shares, the Commission said.