The European Commission was a touch more optimistic about economic growth expectations in the bloc for 2020 in the autumn forecast released on November 5, but warned that any projections were subject to “an extremely high degree of uncertainty and risks,” due to the resurgent number of Covid-19 infections and the new public health measures to limit their spread.
In this latest report, the Commission said it expected the euro zone economy to shrink by 7.8 per cent this year and the EU economy as a whole by 7.4 per cent, compared to 8.7 per cent and 8.3 per cent, respectively, in the summer forecast.
The projection for the economic rebound in 2021 has also been reduced compared to the spring forecast – from 6.1 per cent to 4.2 per cent for the euro area and from 5.8 per cent to 4.1 per cent for the EU economy as a whole.
In the case of Bulgaria, the Commission’s forecast followed the same trend, projecting a decline of 5.1 per cent compared to 7.1 per cent in the summer forecast, while lowering its expectations regarding economic growth in 2021 from 5.3 per cent to 2.6 per cent.
“The decline in consumer spending was curbed by continued wage increases and the relatively low weight in consumption of most affected services. Lower employment and subdued consumer confidence, related to the second wave the pandemic, are set to weigh on private consumption, while the government’s anti-crisis measures are expected to support private income,” the report said.
For 2022, the EC forecast economic growth of 3.7 per cent, projecting that the country’s economy would be back to pre-crisis levels by the end of 2022.
With regards to inflation, the Commission noted the downward trend since the beginning of the year, which it attributed to lower fuel prices. It forecast 1.2 per cent inflation in 2020 and a gradual increase to 1.4 per cent in 2021 and 1.8 per cent in 2022, driven mainly by services inflation, continuing the upward trend from recent years.
On Budget deficits, the EC autumn forecast was for three per cent of GDP this year – the lowest by any EU member state – and in 2021, before shrinking to 1.4 per cent of GDP in 2022. The report noted that the projections were made without including any measures funded by the European Commission’s proposed 672.5 billion euro Recovery and Resilience Facility.
General government debt is expected to increase from 20.2 per cent of GDP in 2019 to 25.7 per cent this year (still third-lowest among EU member states) and 26.4 per cent in 2021.
Speaking about the prospects of the EU economy, European economy commissioner Valdis Dombrovskis said: “This forecast comes as a second wave of the pandemic is unleashing yet more uncertainty and dashing our hopes for a quick rebound. EU economic output will not return to pre-pandemic levels by 2022.”
“But through this turbulence, we have shown resolve and solidarity. We have agreed unprecedented measures to help people and companies. We will work together to chart the course to recovery, using every tool at our disposal,” he said in a statement.
(Photo: Pedro Moura Pinheiro/flickr.com)
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