The European Commission’s summer forecast for the EU economy, released on July 10, kept the growth estimate for the European Union as a whole and the euro zone, while re-iterating its forecast for Bulgaria at 3.3 per cent this year and 3.4 per cent in 2020.
The report noted the Bulgarian economy’s stronger growth in the first quarter, at 3.5 per cent year-on-year compared to 3.1 per cent in 2018, but said that due to the weakening external environment, the country’s economy was expected to expand at a slower pace in the second half of the year.
Strong growth was due to the recovery in exports, which had begun in the second half of 2018 and continued into this year, while private consumption “continued to exhibit robust growth, underpinned by favourable labour market outcomes and strong lending activity.”
Positive trends in disposable income should help to sustain private consumption dynamics, while sound profits, accommodative financing conditions and optimistic expectations about the domestic economy were set to stimulate investment activity, the Commission said.
Additionally, the rapid growth of exports to several relatively small destinations outside the EU in the first four months of 2019 suggested a potentially high capacity for export reorientation. “If the entry into new export markets is sustained, that could lead to better export
performance,” the report said.
For the EU as a whole, the Commission forecast growth of 1.4 per cent this year and 1.6 per cent in 2020 (the same as in the spring forecast in May). In the case of the euro zone, this year’s estimate was unchanged at 1.2 per cent, but the forecast for next year was cut by 0.1 percentage points to 1.4 per cent.
“All EU economies are still set to grow this year and next, even if the robust growth in Central and Eastern Europe contrasts with the slowdown in Germany and Italy,” Valdis Dombrovskis, the European Commissioner for financial stability and the euro, said.
“The resilience of our economies is being tested by persisting manufacturing weakness stemming from trade tensions and policy uncertainty. On the domestic side, a “no deal” Brexit remains a major source of risk,” he said.
In addition to Brexit, there were other significant risks surrounding near-term growth drivers and economic momentum in the euro area. “Weakness in the manufacturing sector, if it were to endure, and depressed business confidence, could spill over to other sectors and harm labour market conditions, private consumption and ultimately growth,” the EC said.
External risks included the extended economic confrontation between the US and China, together with the elevated uncertainty around US trade policy, but also the tensions in the Middle East, which raised the potential for significant oil price increases.
(Photo: Steve Ford/sxc.hu)