World Bank: Bulgarian economic growth expected to pick up in 2024-2025
The Bulgarian economy’s growth is expected to pickup in 2024-2025 with the expected recovery in the euro zone, the World Bank said in its spring 2024 Europe and Central Asia Economic Update.
At the same time, compared with its January forecasts, the World Bank lowered its Bulgarian economic growth by 0.3 percentage points to 2.1 per cent in 2024 and by 0.2 percentage points for 2025.
“Bulgaria’s target to join the euro zone in 2025 may be difficult but not impossible to reach, should there be a stable government and the disinflation trend continues in the coming months, as expected,” the World Bank said.
It said that even if the banking sector remains stable and highly profitable (with net profit up 64 per cent in 2023), the ongoing credit expansion – mirrored by a construction boom – fuels concerns about the build-up of a construction-credit bubble.
“The latter may lead to a painful correction and increase of non-performing loans – at 3.63 per cent at end-2023 – going forward.”
Credit growth remained almost unabated at 12.4 per cent y/y at end-2023 (against 12.7 per cent at end-2022), with credit to households even accelerating to 15.9 per cent, against 14.6 per cent at end-2022.
Similarly, construction permits for residential buildings kept growing at double-digit rates in Q4/2023.
“Political risks have re-escalated after a failed PM rotation between the two ruling coalition partners that toppled the most recent regular government in March 2024,” the World Bank said.
The country is now heading towards a new round of early elections – the sixth in about three years – which threaten to slow reform momentum and jeopardize the achievement of key policy goals such as near-term euro zone membership, the report said.
The government’s budget sets a (cash basis) three per cent fiscal deficit target for 2024 on the back of an ambitious capital spending program.
Thus, consolidation seems to have been put off beyond 2024, the report said.
The current account is projected to keep its slight surplus in 2024-2026 due to the expected downward adjustment of import prices of key raw materials and the increase of net services export, the World Bank said.
(Photo, of the World Bank building in Washington DC: Shiny Things/ flickr)
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