The European Commission’s autumn forecast for the EU economy, released on November 7, raised Bulgaria’s economic growth estimate to 3.6 per cent this year, the same level as in the winter forecast, before it was cut to 3.3 per cent in spring.
But growth was expected to moderate in 2020, when it was forecast at three per cent, compared to the 3.4 per cent estimate in the summer forecast.
Despite weak external demand and elevated uncertainty abroad, domestic demand dynamics should underpin growth in 2019, the Commission said. Exports also contributed to growth, continuing the favourable trend in the first quarter, but declining in the second quarter as external demand has continued to falter.
However, investment was expected to regain some momentum in the next two years and grow at a moderate pace, against the backdrop of elevated economic uncertainty abroad and somewhat worsened growth prospects, the Commission said.
The risks to the baseline scenario were mainly on the downside, “associated with a potential sharp and protracted deterioration of external demand from the major trading partners and second-round effects through higher unemployment and lower domestic demand,” the report said.
Other trends forecast by the EC for the Bulgarian economy included inflation at 2.4 per cent this year and 1.6 per cent in 2020; the unemployment rate continuing its downward trend to reach 4.4 per cent this year and 4.1 per cent in 2020; as well as a Budget surplus of 1.1 per cent this year and 0.9 per cent in 2020.
The raised growth forecast for Bulgaria in 2019 went against the EU-wide trend, as the Commission cut its growth estimates for the euro area to 1.1 per cent (from 1.2 per cent in summer) and the EU as a whole to 1.4 per cent (from 1.6 per cent), citing external factors and increased uncertainty.
“So far, the European economy has shown resilience amid a less supportive external environment: economic growth has continued, job creation
has been robust, and domestic demand strong. However, we could be facing troubled waters ahead: a period of high uncertainty related to trade conflicts, rising geopolitical tensions, persistent weakness in the manufacturing sector and Brexit,” Valdis Dombrovskis, the European Commissioner for financial stability and the euro, said.
The risks to the outlook were mainly to the downside, the Commission said, most notably a rise in trade and geopolitical tensions could dampen growth or a sharper-than-expected slowdown in China. Within Europe, such risks included a disorderly Brexit and the possibility that weakness in the manufacturing sector could have a bigger spillover effect on domestically-oriented sectors, the Commission said.
(Photo: Pedro Moura Pinheiro/flickr.com)