Bulgaria’s economy was set to contract by 6.2 per cent in 2020 as a result of the Covid-19 global pandemic, according to the latest World Bank’s Global Economic Prospects report, released on June 9.
That was a drastic drop from the three per cent growth estimate in the World Bank’s Global Economic Prospects report in January, and the 9.2 percentage points differential was the second largest decrease in the lender’s Europe and Central Asia region, behind Croatia’s 11.9 percentage points drop.
Despite the relative success in halting the spread of the disease, Bulgaria was expected to be one of the countries affected the worst in economic terms, its decline much worse than the five per cent drop forecast for the Central Europe sub-region or the 4.7 per cent contraction forecast for the Europe and Central Asia region.
“The outlook assumes that government restrictions are gradually lifted by the start of the second half of the year. In a scenario in which the effects of the pandemic wane and trade and investment recover, Europe and Central Asia growth would be anticipated to revive to 3.6 per cent in 2021,” the World Bank said.
In the Central Europe sub-region, the lender forecast an economic rebound of 3.8 per cent in 2021, but Bulgaria was expected to outperform that figure, with the World Bank estimating 2021 economic growth in the country at 4.3 per cent.
The lender warned that balance of risks was slanted heavily to the downside. “A greater spread of infections across the region and associated restrictive measures would weigh even more harshly on consumption and investment. In addition, a sharp fall in remittances could amplify the regional economic downturn,” the report said.
“A prolonged recession could negatively affect domestic financial sectors and heighten the risk of financial instability. A protracted deterioration in investment sentiment could lead to a substantial decline in foreign direct investment. Regional weather patterns, including the drought that is affecting economies in Eastern Europe and the Western Balkans, also pose a downside risk to the forecasts.”
Overall, the report forecast the global economy would shrink by 5.2 per cent in 2020, compared to the 2.5 per cent growth estimate in the January report. “The pandemic represents the largest economic shock the world economy has witnessed in decades, causing a collapse in global activity,” the World Bank said.
“The pandemic and associated mitigation measures have sharply curbed consumption and investment, as well as restricted labor supply and production. The cross-border spillovers have disrupted financial and commodity markets, global trade, supply chains, travel, and tourism.”
The lender warned that in many countries, the deep recession triggered by Covid-19 “will likely weigh on potential output for years to come”, recommending that governments take steps “to alleviate the adverse impact of the crisis on potential output by placing a renewed emphasis on reforms that can boost long-term growth prospects.”
(Photo of the World Bank headquarters: Shiny Things/flickr.com)
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Section supported by the Embassy of Switzerland