January 31 (SeeNews) - Bulgaria's real economy is expected to grow by 0.4% in 2023, the central bank said, revising upwards its September forecast by 0.3 percentage points.
The country's economic growth in 2022 is estimated at 3.4%, up from the rate of 2.8% projected in September, as a result of stronger private consumption and the accumulation of stocks of raw materials and final products in the economy, the Bulgarian National Bank (BNB) said in a quarterly macroeconomic report published on Monday. The recent NSI revision of gross domestic product (GDP) data also contributed to the BNB's forecast update.
In the next 12 months, Bulgaria's economy will also be boosted through investment of funds received under the country's EU-approved revised Recovery and Resilience Plan (RRP).
According to the central bank, the economic slowdown in annual terms in 2023 will be the result of a shift from a positive to a negative contribution of the change in economic inventories, in addition to an expected drop in exports due to both lower external demand and the ban on exports of the Lukoil Neftochim refinery's output to countries other than Ukraine.
In 2024, Bulgaria's GDP growth is forecast to ease to 3.2%, or 0.2 pp lower than the September projection. This downwards revision is due to an implied decrease in fixed capital investment by both the private and public sectors as the rate of absorption of EU grants in the new 2021-2027 programming period abates.
This year's annual inflation, measured by the Harmonised Index of Consumer Prices (HICP), is expected to inch up by 0.1 pp compared to the September forecast, reaching 4.2%. There will, however, be a marked inflation slowdown against 2022. For the past year, BNB projects HICP inflation at 14.3%, or 0.6 pp lower than expected in its previous quarterly review. The BNB also lowered its HICP inflation prediction for 2023, by 0.1 pp to 3.3%.
Pointing to the main risks to the base economic scenario, the central bank highlighted Russia's ongoing war in Ukraine and its potential negative effects on the cost of materials and supply chain dynamics as well as the political uncertainty in Bulgaria and the resulting lack of a 2023 state budget and medium-term forecast of government expenditure. Real economic growth may also be slowed down by a potential delay in EU funding absorption, particularly given parliament's recent decision that Bulgaria should seek a renegotiation of the energy section of its RRP, the central bank said.