World Bank lowers economic growth forecast for Bulgaria
The World Bank is forecasting Bulgaria’s real GDP growth to come in at 1.5%, a reduction of 0.2 percentage points compared with the Bank’s previous forecast in January.
According to the World Bank’s Global Economic Prospects report for June 2023, real GDP growth in Bulgaria will be 2.8 per cent, a reduction of 0.5 percentage points compared with the January forecast.
The Bank forecasts Bulgaria’s 2025 economic growth will be three per cent.
The report said that economic prospects in Europe and Central Asia (ECA) continue to be held back by the Russian Federation’s invasion of Ukraine.
Growth in ECA is projected to remain weak in 2023, edging up to a modest 1.4 per cent, as the effects of the invasion, high inflation, tight monetary policies, and subdued external demand weigh on activity, the report said.
ECA regional growth is forecast to pick up to 2.7 per cent in 2024, as inflation gradually recedes and demand firms.
“Risks to the outlook are tilted to the downside and include an intensification of Russia’s invasion in Ukraine, rising geopolitical tensions elsewhere in the region, higher and more sustained inflation, a sharper economic slowdown than expected in the region’s main trading partners, and further financial sector turmoil,” the World Bank said.
The global economy remains in a precarious state amid the protracted effects of the overlapping negative shocks of the pandemic, the Russian Federation’s invasion of Ukraine, and the sharp tightening of monetary policy to contain high inflation, the report said.
“Global growth is projected to slow significantly in the second half of this year, with weakness continuing in 2024. Inflation pressures persist, and tight monetary policy is expected to weigh substantially on activity.
“Recent banking sector stress in advanced economies will also likely dampen activity through more restrictive credit conditions,” the World Bank said.
The possibility of more widespread bank turmoil and tighter monetary policy could result in even weaker global growth. Rising borrowing costs in advanced economies could lead to financial dislocations in the more vulnerable emerging market and developing economies (EMDEs), it said.
In low-income countries, in particular, fiscal positions are increasingly precarious. Comprehensive policy action is needed at the global and national levels to foster macroeconomic and financial stability.
Among many EMDEs, and especially in low-income countries, bolstering fiscal sustainability will require generating higher revenues, making spending more efficient, and improving debt management practices.
Continued international cooperation is also necessary to tackle climate change, support populations affected by crises and hunger, and provide debt relief where needed, the report said
“In the longer term, reversing a projected decline in EMDE potential growth will require reforms to bolster physical and human capital and labor-supply growth,” the World Bank said.
(Photo: flickr.com/ Shiny Things)
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