EU spring forecast bumps up Bulgaria 2018 growth estimate to 3.8%

Written by on May 3, 2018 in Bulgaria - Comments Off on EU spring forecast bumps up Bulgaria 2018 growth estimate to 3.8%

The European Commission’s spring forecast for the EU economy, released on May 3, said that Bulgaria’s economy would “continue growing robustly” in 2018, driven mainly by strong domestic demand and spurred by “positive developments” in the labour market and real disposable income growth.

The Commission’s latest report set the growth estimate for this year at 3.8 per cent, reversing the 0.1 percentage point cut made in the winter forecast, while economic growth in 2019 is now expected to reach 3.7 per cent (up from 3.5 per cent in the winter forecast.)

Even as private consumption remained “buoyant”, growth was pushed higher by public consumption, which is expected to rise thanks to the “capital expenditure of the government due to the uptake of EU funds under the 2014-2020 EU programming period,” the Commission said.

The risks to the baseline scenario were broadly balanced, with higher wages and employment growth potentially translating to further boost domestic demand, while on the downside, the main threat came from potential negative developments outside Bulgaria, given the openness of its economy.

Other trends forecast by the EC for the Bulgarian economy included a decline in its current account surplus, given that high domestic consumtion contributed to a trade deficit, from three per cent of GDP last year to 1.4 per cent in 2018 and 0.8 per cent next year; inflation rising further to 1.8 per cent after 2017 put an end to a four-year deflationary trend; and a small Budget surplus of 0.6 per cent of GDP both this year and in 2019.

For the EU as a whole and the euro zone, the Commission forecast growth of 2.3 per cent, a touch below the 2.4 per cent recorded in 2017, which was also the fastest economic growth pace recorded by the EU in the decade since the global financial crisis.

“The economic expansion in Europe is set to continue at a solid pace this year and next, supporting further job creation. However, we also see increased risks on the horizon. This is why we should use the current good times to make our economies more resilient,” Valdis Dombrovskis, the European Commissioner for financial stability and the euro, said.

The risks to the outlook have increased and become more negative, the Commission said, giving the example of recent financial market volatility and the threat posed by escalating trade protectionism in the United States.

Beyond the risks associated with trade tensions, there were additional downside risks related to geopolitical tensions in other parts of the world, the Commission said, while within Europe, risks related to the outcome of the Brexit negotiations also remained.

(Photo: Steve Ford/sxc.hu)

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