The European Bank for Reconstruction and Development (EBRD) has estimated that Bulgaria’s economy would grow by 3.6 per cent in 2018, the same as it did in 2017.
EBRD’s latest forecast, made in the regional economic prospects update released on May 10, is 0.4 percentage points higher compared to its previous forecast made in May 2017.
For 2019, the bank said it expected the Bulgarian economy to expand by 3.4 per cent.
Private consumption was the main driver of growth, as average wages increased on account of the tightness of the labour market and a 10 per cent increase in the minimum wage, the lender said in its report.
Improved absorption of EU structural funds saw investment start to pick up in 2017, following a decline in 2016, but the impact of net exports on growth turned negative due to the consumption-driven increase in imports, EBRD said.
Following a period of deflation that lasted three years, consumer prices increased in 2017, again due to growing household consumption.
The government stuck to tight fiscal policies throughout 2017, leading to a budget surplus standing at 0.9 per cent of GDP at the end of the year, the bank noted.
“Growth will continue to be driven by domestic demand, as tight labour market conditions spur consumption and investment strengthens as work on infrastructure projects financed under the EU’s 2014-20 budget continues,” the report said.
(Photo: Alessandro Paiva/sxc.hu)