IMF raises Bulgaria 2019 economic growth forecast to 3.7%

Written by on October 16, 2019 in Bulgaria - Comments Off on IMF raises Bulgaria 2019 economic growth forecast to 3.7%

The International Monetary Fund (IMF) has raised its economic growth forecast for Bulgaria to 3.7 per cent 2019, before slowing to 3.2 per cent in 2020, according to its October 2019 World Economic Outlook.

In its April forecast, the Fund projected economic growth of 3.3 per cent this year and three per cent in 2020.

Unemployment is seen as dropping from 5.3 per cent in 2018 to 4.9 per cent in 2019 and 4.8 per cent 2020, the IMF said. It also made a small upward revision for the annual average consumer price inflation (CPI) from to 2.4 per cent to 2.5 per cent, compared to 2.6 per cent in 2018.

The current account balance is forecast to remain positive, but dropping from 4.6 per cent last year to 3.2 per cent in 2019 and 2.5 per cent in 2020.

But although World Economic Outlook was positive on Bulgaria’s immediate prospects, the global picture was much more downbeat, with the IMF cutting its 2019 world economic growth forecast to three per cent, down from 3.3 per cent in April and 3.6 per cent in last year’s October report.

Its 2020 forecast was for a moderate rebound to 3.4 per cent, down from 3.6 per cent projected in the April report.

“This subdued growth is a consequence of rising trade barriers, elevated uncertainty surrounding trade and geopolitics, idiosyncratic factors causing macroeconomic strain in several emerging market economies, and structural factors, such as low productivity growth and aging demographics in advanced economies,” the Fund said.

“A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade. […] Higher tariffs and prolonged uncertainty surrounding trade policy have dented investment and demand for capital goods, which are heavily traded,” according to the IMF.

In contrast to weak manufacturing and trade, the services sector across much of the globe continued to hold up, which helped wage growth in advanced economies, but the divergence between manufacturing and services “has persisted for an atypically long duration, which raises concerns of whether and when weakness in manufacturing may spill over into the services sector.”

The Fund said that the growth figures were buoyed by monetary policy easing across advanced and emerging markets. This stimulus added 0.5 percentage points to growth in 2019 and 2020, helping offset the negative impact of US–China trade tensions, which the IMF estimated would impact global growth by 0.8 per cent next year.

“With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot,” the IMF warned.

The Fund said that its forecast faced significant downside risks, as trade barriers and heightened geopolitical tensions, including Brexit, could further disrupt supply chains and hamper confidence, investment, and growth.

“Such tensions, as well as other domestic policy uncertainties, could negatively affect the projected growth pickup in emerging market economies and the euro area. A realisation of these risks could lead to an abrupt shift in risk sentiment and expose financial vulnerabilities built up over years of low interest rates,” the IMF said.

(Photo: Piotr Lewandowski)

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