The European Commission’s autumn forecast for the EU economy, released on November 5, raised the economic growth estimate in the 28-country bloc, saying that the economic recovery was resilient and widespread, but slow.
As it did in its previous forecast in spring, the Commission credited low oil prices and the depreciation of the euro, as well as the European Central Bank’s quantitative easing programme for the continued upward trend. As the impact of positive factors was fading, the main challenges for the EU economy included the slowdown in emerging market economies and global trade, as well as persisting geopolitical tensions the Commission said.
The latest report revised the estimated economic growth this year to 1.9 per cent in the EU as a whole and 1.6 per cent in the euro area (both figures were 0.1 per cent higher than the respective forecasts in spring).
Valdis Dombrovskis, EC vice-president and the commissioner responsible for the euro, said that this growth was “largely backed by temporary factors such as low oil prices, a weaker euro exchange rate and the ECB’s accommodative monetary policy” and the EU countries had to take advantage of “these temporary tailwinds to pursue responsible public finances, boost investment and carry out structural reforms to enhance competitiveness.”
In Bulgaria’s case, the Commission was more optimistic than in spring, revising its growth forecast to 1.7 per cent, compared to one per cent in the spring report. This is lower than the updated government target of two per cent, set in the macroeconomic framework document that was approved by Cabinet as part of the 2016 budget package.
The EC said that growth-supporting factors including absorption of EU funds were expected to “lose strength” in 2016, resulting in 1.5 per cent GDP growth next year before picking up to two per cent in 2017.
Bulgaria was seen benefitting from net exports, which was projected to outpace imports, helped both by the higher demand from the EU, but also the depreciating euro, to which the Bulgarian lev is pegged.
Public investment was expected to decline because implementation of EU co-funded projects in the new programming period would take time, but net exports were expected to “contribute positively” to growth.
“Overall, risks to the growth outlook seem balanced. On the positive side, the stronger exports and gains in employment could fuel investment and private consumption growth more than expected. Low interest rates and oil prices could also provide stronger-than-projected support to some economic sectors,” the Commission said, but it also cautioned that “increased geopolitical uncertainties and a slowdown in main trading partners would pose a downside risk due to the high degree of openness of the economy.”
(Photo: Michael Faes/sxc.hu)