EU summer forecast leaves Bulgaria 2018 growth estimate unchanged 3.8%

Written by on July 12, 2018 in Europe - Comments Off on EU summer forecast leaves Bulgaria 2018 growth estimate unchanged 3.8%

The European Commission’s summer forecast for the EU economy, released on July 12, reduced the growth estimate for the European Union as a whole and the euro zone, but left Bulgaria’s forecast unchanged at 3.8 per cent this year and 3.7 per cent in 2019.

As in the previous report, strong domestic demand was identified as the main driver of economic growth, with positive labour market developments and planned wage increases in the public sector providing the “fuel for continued private consumption growth.”

Investment growth was also expected to be strong, mainly due to the recovery in EU funds absorption, but also due to stronger private sector investment. Exports could grow due to strong external demand, but the trade balance was expected to be negative as domestic consumption would push imports, which would continue to outweigh exports.

For the EU as a whole and the euro zone, the Commission forecast growth of 2.1 per cent, 0.2 percentage points lower than in the spring forecast in May.

“European economic activity remains solid with 2.1 per cent GDP growth forecast for the euro area and the EU28 this year. Nevertheless, the downward revision of GDP growth since May shows that an unfavourable external environment, such as growing trade tensions with the US, can dampen confidence and take a toll on economic expansion,” Valdis Dombrovskis, the European Commissioner for financial stability and the euro, said.

The spring forecast had identified trade-related risks and some of those have already materialised, but the balance of risks remained clearly tilted to the downside, the report said.

The main downside risks were external, concerning “the dangerous nexus between a possible further escalation of trade disputes driven by the US, the potentially disruptive effect of tighter financing conditions, and increased imbalances stemming from the highly pro-cyclical
fiscal policy in the US.”

Internally, political and policy uncertainty in a number of EU countries also represented a downside risk – including the risks related
to the outcome of Brexit negotiations, particularly if the outcome was different from the technical assumption of status quo in terms of trading relations between the UK and the rest of the EU for 2019.

(Photo: Steve Ford/sxc.hu)

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