The European Commission’s spring forecast for the EU economy, released on May 12, raised the estimate for Bulgaria’s economic growth this year to 3.5 per cent, but lowered its projection for 2022 to 4.7 per cent.
In its previous winter forecast, the Commission had estimated 2.7 per cent growth in 2021 and 4.9 per cent in 2022.
The Commission said that the figures were conditional on “the absorbtion profile” of funds under the Recovery and Resilience Plan, which was expected play a key role in any upswing in investment.
After Bulgaria’s economy shrank by 4.2 per cent in 2020 as a result of the Covid-19 pandemic, the export of goods was expected to lead the recovery in 2021 on the back of improved foreign demand
Domestic demand was also set to contribute to the economic expansion, as the gradual easing of restrictions previously imposed by the government was assumed to encourage pent-up demand in the second half of 2021, while positive labour market developments were forecast to support consumer spending in 2022.
Bulgaria’s unemployment rate increased “significantly” with the onset of Covid-19, but stabilised at 5.1 per cent in the second half of 2020, thanks to the government’s job-retention schemes, which were targeted primarily at the manufacturing and hospitality sectors.
In line with the economic recovery, the unemployment rate was set to drop to 4.8 per cent this year and fall below its pre-crisis level of 4.2 per cent in 2022. “Real wages are expected to continue their upward trajectory as labour market slack continues to diminish at a more restrained pace,” the EC said.
Inflation, which fell in 2020 due to lower energy prices and lower price increases in processed and unprocessed foods, was set to accelerate to 1.6 per cent this year.
The European Commission also expects the government deficit to remain above three per cent of gross domestic product in 2021, having been estimated at 3.4 per cent in 2020.
The Commission said that the risks to its forecast were broadly balanced, with a possibility that positive second-round effects from the Recovery and Resilience Plan on private consumption and investment could potentially be larger, especially by bringing forward domestic demand.
On the downside, delays and inefficiencies in the implementation of Bulgaria’s Recovery and Resilience Plan could hamper overall economic activity, the EC said.
Overall, the spring economic forecast said that while growth rates would continue top vary across the EU, all 27 member states should see their economies return to to pre-crisis levels by the end of 2022.
“While we are not yet out of the woods, Europe’s economic prospects are looking a lot brighter. As vaccination rates rise, restrictions ease and people’s lives slowly return to normal, we have upgraded forecasts for the EU and euro area economies for this year and next,” Valdis Dombrovskis, the European Commissioner for financial stability and the euro, said.
“The Recovery and Resilience Facility will help the recovery and will be a real game changer in 2022, when it will ramp up public investments to the highest level in over a decade. Much hard work still lies ahead, and many risks will hang over us as long as the pandemic does.”
The Commission raised its forecasts for EU27 economic growth this year to 4.2 per cent (from 3.7 per cent in its winter forecast) and euro zone growth is expected to be 4.3 per cent (up from 3.8 per cent).
In 2022, both the EU27 and the euro area are expected to grow by 4.4 per cent, up from 3.9 per cent and 3.8 per cent, respectively, in the EU winter forecast.
(Photo: Steve Ford/sxc.hu)
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