World Bank slightly raises growth outlook for Bulgaria
The World Bank has slightly increased its forecast real GDP growth outlook for Bulgaria for 2022, to 3.8 per cent, 0.5 percentage points higher than its forecast in June 2021.
In its January 2022 Global Economic Prospects report, released on January 11, the World Bank said that it expected GDP growth in Bulgaria in 2021 to come in at 3.3 per cent, 0.7 percentage points more than the figure in its June 2021 report.
The World Bank has revised its forecast GDP growth outlook for Bulgaria for 2023 to 3.6 per cent, 0.2 percentage points more than the figure in its June 2021 outlook.
The institution said that growth in the European and Central Asia (ECA) region is forecast to slow to three per cent in 2022—about half the pace of 2021—as tighter macroeconomic policy and recurrent Covid-19 outbreaks, including from Omicron, weigh on demand.
Regional growth is forecast to continue to ease in 2023, slowing to 2.9 per cent, as fiscal support continues to be withdrawn.
The boost from external demand is expected to fade in 2023, as global and euro area growth decelerate and commodity prices edge down.
The outlook has been downgraded by an average of 0.8 percentage points over 2022-23, partly owing to a sharp rise in policy uncertainty or geopolitical tensions in some large economies, which is anticipated to dent investment.
The weaker outlook in the near term also reflects a faster removal of monetary policy accommodation than envisioned because of inflationary pressures.
Per capita GDP in 2023 is projected to be about 1.5 per cent below its pre-pandemic trend, and the pace of ECA’s per capita income catch-up with advanced economies is expected to be significantly slower over 2021-23 than in the decade before the pandemic.
The pandemic has reversed earlier gains in poverty reduction, the World Bank said.
By the end of 2021, Covid-19 is likely to have pushed an additional 4.3 million people in ECA—about one per cent of the region’s population—under the $5.50 a day poverty line.
“Although this figure is smaller than in previous forecasts, it still indicates that the recovery is not inclusive,” the World Bank said.
“The incomes of many people in, or close to, poverty have been impacted by job losses, reductions in working hours, the removal of policy support, and higher inflation, particularly for energy and food items.”
Growth in Eastern Europe is projected to be the weakest among the ECA subregions, halving from 3.1 per cent in 2021 to 1.4 per cent in 2022.
The subdued outlook, particularly for private investment, reflects ongoing geopolitical tensions in Ukraine and the impact of economic sanctions on Belarus’s economy, which is expected to contract in 2022.
“Assuming geopolitical tensions do not escalate further, improving domestic demand should help lift output in Eastern Europe to 3.2 per cent in 2023. Longer-term growth prospects are constrained by sluggish reform momentum, which has hindered competition and private-sector development,” the World Bank said.
Following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from Covid-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies, according to the World Bank’s latest Global Economic Prospects report.
Global growth is expected to decelerate markedly from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world.
The rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term, the World Bank said.
In addition, a notable deceleration in major economies—including the United States and China—will weigh on external demand in emerging and developing economies.
“At a time when governments in many developing economies lack the policy space to support activity if needed, new Covid-19 outbreaks, persistent supply-chain bottlenecks and inflationary pressures, and elevated financial vulnerabilities in large swaths of the world could increase the risk of a hard landing,” the World Bank said.
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