January 9 (SeeNews) - Bulgaria's economy is expected to show signs of stagflation in 2023, with gross domestic product (GDP) projected to edge up by a mere 0.9%, France-based credit insurance company Allianz Trade, formerly Euler Hermes, said on Monday.
Bulgaria's real economy is expected to grow by 2% in 2024, Allianz Trade said in a regular report.
As the country is strongly dependent on exports, negative effects will be felt as a consequence of the war in Ukraine and the dim perspectives on economic growth for Bulgaria's main trading partner, the EU, according to the report.
"In addition, there is the diminished purchasing power of the population due to persistent inflation, with household spending also expected to slow down significantly to 1%. As a result, we have indications of even a weak recession at the beginning of 2023 in Bulgaria," Allianz Trade chief analyst Manfred Stamer said.
In the next 12 months, EU funds will provide the strongest boost to the Bulgarian economy, as fiscal measures which led to a 6% public spending rise and 3% GDP growth in 2022 are set to be reduced.
Expectations are for Bulgaria's average inflation to slow down to over 10% in 2023, after reaching over 15% last year.
Public debt, which reached 24% of the GDP in 2022, will stabilise without substantial changes in 2023 and 2024. Fiscal stability, ensured by the currency board and a traditionally conservative fiscal policy, will help contain budget deficit to less than 3% of GDP in 2023 and 2024.
Allianz Trade also forecast that salaries will almost catch up with prices, by rising 9.5% in 2023, with unemployment to settle at around 5%.
Bulgaria is likely to join the eurozone in 2025 at the earliest, Allianz Trade said, casting doubts over the country's stated plans to adopt the euro from January 1, 2024.