The European Commission’s spring forecast for the EU economy, released on May 7, sought to temper expectations about Bulgaria’s economic growth in 2019, lowering the growth estimate to 3.3 per cent this year and 3.4 per cent in 2020.
In its previous winter forecast, the Commission had estimated 3.6 per cent growth in 2019 and 2020. The latest report, however, notes that recovery would be “curbed somewhat by waning foreign demand, labour market tightness and reduced consumer sentiment.”
“Domestic demand should continue to expand but at a slower pace, due to more moderate private consumption. Consumer confidence remained subdued in the first few months of 2019, suggesting more cautious spending behaviour through the year,” the EC said.
At the same time, investment was projected to remain strong and exports were expected to recover as one-off effects that created a large trade gap in 2018 dwindled. “This should hold even if the subdued demand from major trading partners continue to weigh on the exports,” the spring forecast said.
The risks to the baseline scenario were broadly balanced, with further labour market tightening and improved consumer confidence potentially spurring stronger private consumption, while the main downside risk was the possibility of a sharp contraction in major export markets.
Other trends forecast by the EC for the Bulgarian economy included inflation slowing down to two per cent this year and 1.8 per cent in 2020; the unemployment rate continuing its downward trend to reach five per cent this year and 4.8 per cent in 2020; as well as a rising Budgget surplus of 0.8 per cent this year and one per cent in 2020.
The Commission also cut its growth estimates for the EU as a whole, saying that the recent slowdown in global growth and world trade, together with high uncertainty about trade policies, was weighing on the bloc’s economic prospects.
“The European economy is showing resilience in the face of a less favourable external environment, including trade tensions. Growth is set to continue in all EU Member States and pick up next year, supported by robust domestic demand, steady employment gains and low financing costs,” Valdis Dombrovskis, the European Commissioner for financial stability and the euro, said.
The European Commission cut its EU27 growth forecast to 1.4 per cent this year and 1.7 per cent in 2020 (compared to 1.5 per cent and 1.8 per cent, respectively, in the winter forecast), while economic growth in the euro zone was expected to reach 1.2 per cent this year and 1.5 per cent in 2020 (down from 1.3 per cent and 1.6 per cent in the winter forecast.)
The risks to the outlook remained “prominent”, the Commission said, most notably the potential for further protectionist moves in US trade policy – should the US impose tariffs on European cars and car parts, the move would have knock-on effects “well beyond the automobile sector.”
Within Europe, a change in the trade relationships with Britain, and in particular a ‘no-deal Brexit’, would dampen economic growth, although only to a “minor extent” for the EU27, the Commission said.
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