Bulgaria's c-bank raises 2023 GDP growth f'cast

In 2024, gross domestic product (GDP) growth is estimated to speed up to 2.7%, which is 0.5 pp lower than projected in June, the Bulgarian National Bank (BNB) said in its November macroeconomic forecast published on Monday.

The central bank also lowered by 0.4 pp to a real 3.6% its estimate for GDP growth in 2025.

The expectations for stronger domestic demand in 2023 are underpinned by wage and pensions increases as well as households' weaker tendency to save up, according to the lender.

"An additional factor behind the expected higher private consumption growth is the projected weaker pass-through of euro area interest
rate increases to interest rate increases in the country," BNB said.

Higher investments backed by incoming EU funds under the Recovery and Resilience Facility (RRF) will support the economic expansion in 2025. The downward revision was justified by the projected lower growth of fixed capital investment by the private sector, BNB noted.

Inflation measured by the Harmonised Index of Consumer Prices (HICP) used EU-wide is seen at 6.1% at the end of 2023, before it decelerates to 3.1% in 2024 and 2025.

International geopolitical tensions and military conflicts in Ukraine and the Middle East are posing a prevailing risk for a lower economic growth in Bulgaria in 2024 and 2025, BNB said in an assessment of the risks to its baseline scenario. Domestically, the risks mostly stem from a potential slower intake of EU funds and a delay in implementing projects planned under the National Recovery and Resilience Plan, the lender added.