The European Commission’s autumn forecast for the EU economy, released on November 11, raised the estimate for Bulgaria’s economic growth this year to 3.1 per cent, but lowered its projection for 2023 to 1.1 per cent.
In its previous summer forecast, the Commission had estimated 2.8 per cent gross domestic product (GDP) growth in 2022 and 2.3 per cent in 2023.
This was the second quarter in a row that the EC raised this year’s growth estimate while cutting the one for next year, having projected 2.1 per cent GDP growth in 2022 and 3.1 per cent in 2023 in its spring forecast.
“Economic expansion is expected to slow down in the second half of 2022 and in 2023, before somewhat higher growth resumes in 2024,” the Commission said, projecting 2.4 per cent growth in 2024.
“Consumer sentiment deteriorated in 2022-Q3, indicating stagnation in household consumption by the end of the year,” the forecast said.
“Household consumption is expected to remain subdued throughout 2023 and then to pick up gradually in 2024, as inflation pressures abate. An important factor that is set to rein in private demand is the assumed higher interest rates in the next two years.”
Bulgaria’s harmonised consumer price index, the figure used to compare inflation with the EU average, was projected to increase by 12.8 per cent in 2022, compared to the 12.5 figure in the summer forecast.
Inflation is expected to slow down to 7.4 per cent in 2023 and 3.2 per cent in 2024, as food price inflation is projected to “decelerate gradually”, while energy price inflation is forecast to “decelerate and turn negative in the second half of next year and then to remain negative in 2024.”
Economic growth in the EU as a whole was projected at 3.3 per cent in 2022 (3.2 per cent in the euro zone), before slumping to 0.3 per cent in the EU27 and euro area in 2023. It was expected to rebound to 1.6 per cent in the EU27 and 1.5 per cent in the euro area in 2024.
Gross domestic product is expected to shrink both in the last quarter of this year and the first quarter of 2023, which would put the EU, euro zone and most member states in a technical recession this winter, but “growth would return in spring, as inflation progressively relaxes its grip on the economy,” the forecast said.
The Commission said that the economic outlook for the bloc as a whole remained “surrounded by an exceptional degree of uncertainty as Russia’s war of aggression against Ukraine continues and the potential for further economic disruptions is far from exhausted.”
“The largest threat comes from adverse developments on the gas market and the risk of shortages, especially in the winter of 2023-24. Beyond gas supply, the EU remains directly and indirectly exposed to further shocks to other commodity markets reverberating from geopolitical tensions,” the forecast said.
“Longer-lasting inflation and potential disorderly adjustments on global financial markets to the new high interest rate environment also remain important risk factors. Both are amplified by the potential for inconsistency between fiscal and monetary policy objectives.”
(Photo: Pedro Moura Pinheiro/flickr.com)
Please support independent journalism by clicking on the orange button below. For as little as three euro a month or the equivalent in other currencies, you can support The Sofia Globe via patreon.com and get access to exclusive subscriber-only content: