Following robust growth in 2022, the Bulgarian economy is set to slow down substantially in 2023 in tune with the downward trend in the euro zone, the World Bank said in its European and Central Asia Economic Update for spring 2023.
The World Bank adjusted its economic growth forecast for Bulgaria for 2023 to 1.5 per cent, a reduction of 0.2 percentage points compared with its January 2023 forecast, and 2.8 in 2024, a decrease of 0.5 percentage points compared with January 2023’s forecast.
Growth may be further suppressed if Bulgaria fails to deliver on the reforms embedded in the milestones under the National Recovery and Resilience Plan (NRRP), resulting in a freeze or reduction of upcoming tranches, depriving the country of substantial resources, the World Bank said.
Inflation is expected to decelerate in 2023 but remain elevated, the report said.
The fiscal deficit is projected to expand to 3.6 per cent of GDP due to the economic slowdown and the rollover of fiscal discretionary measures to 2023.
“Bulgaria’s outlook continues to be marred by prolonged political instability,” the World Bank said.
“In addition to creating an unpredictable business environment, the political impasse is already impeding the implementation of reforms, the NRRP and euro zone accession plans.”
The lack of a working Parliament has prevented the passage of key pieces of legislation, set as milestones under the NRRP and as commitments under the country’s roadmap for euro adoption, the report said.
“Should this situation linger on, the country may lose EU funds and may delay its euro zone entry beyond the likely 2025, which would take a toll on its growth prospects and slow down convergence to average EU income levels.”
The economic slowdown and prolonged inflationary pressures are expected to decelerate poverty reduction, the World Bank said.
(Photo of the World Bank headquarters: Shiny Things/flickr.com)
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