Bulgarian economy will grow by 1.5% in 2014, and the main engine for this will be domestic demand endash as household consumption and private investment is increasing, shows the autumn forecast of the European Commission, published on November 6. The forecast for Bulgaria’s GDP is estimated at 80.2 billion levs in 2013 and 82.9 billion levs in 2014 at current prices, which is over 1 billion lev more than what was projected by the Ministry of Finance. The analysis highlights a number of internal factors for improvement of the economy in the second half of the year, with a growth in retail sector in July and August and an increase in the purchasing power of households. Just as Bulgariarquote s Finance Ministry, the EU Commission expects real GDP growth in 2013 to reach 0.5%, which is below the potential of the economy, but the positive growth in the second half of the year is expected to affect next yearrquote s performance. The commission forecast coincides with the expectations of the Ministry of Finance that the current stabilization in the labour market will continue in the coming years, which will boost confidence of households and hike consumption. A gradual recovery of private investment is supported by the financial sector’s stability. The risks to the macroeconomic outlook are assessed as balanced.
The countryrquote s budget deficit on an accrual basis is 2% in 2013, similar to the expectations of the Ministry of Finance for the period. This is due to a combination of weak economic growth and the newly introduced fiscal stimuli for an economy that is below its potential for the current year, the Commission believes, provided that during the previous three years Sofia carried out fiscal consolidation. Additional costs are mainly to be incurred for social purposes, investments and other expenditures.
The current estimate of the EC was prepared before The Cabinet of Mr. Oresharski submitted the draft budget for 2014 to Parliament and did not reflect the fiscal consolidation measures that are planned for the period 2014-2015 by the Bulgarian Government. For this reason the European Commission forecasts Bulgariarquote s budget deficit to remain within 2% for 2014 and to decrease to 1.8 % in 2015.
The BANKER
