February 9 (SeeNews) - Bulgaria's economy will expand by 1.0% this year, easing from estimated growth of 3.7% in 2022, with high consumer prices and a looming mild recession in Western Europe in early 2023 emerging as the main risks to the economic outlook, French credit insurance agency Coface said.
Possible interest rate hikes, which will raise borrowing costs, and a negative trade balance as exports drop due to weak demand will weigh on gross domestic product (GDP) growth in 2023, Coface said in its country risk assessment report on Bulgaria for the final quarter of 2022, published earlier this week.
"Strong price pressure eroded the purchasing power of private households as well as the investment appetite of private corporations in 2022, and should still weigh on both in 2023," the agency said.
These economic hurdles will be offset by Bulgaria's low public debt, which will edge up to 23.7% of GDP in 2023 from 22.5% in 2022. The economy will be supported by an ongoing recovery in the tourism sector as well as fiscal measures cushioning high energy prices for businesses and households, such as the extended electricity price cap for private households and big companies to end-2023 along with certain exemptions from value-added tax (VAT) for small businesses until the end of 2024.
A major drawback is seen to be the continued political impasse in the country, which in April is heading for its fifth general election in under two years. Political fragmentation, in tandem with high consumer prices, are likely to delay Bulgaria's accession to the eurozone beyond the start of next year as originally planned. Average annual inflation is projected to abate to 11.2% in 2023 from 15.3% last year.
"Bulgaria is fulfilling all criteria except for inflation, as at the end of 2022, the Bulgarian inflation rate was 9.5 percentage points above the Eurozone lower bound. In combination with the domestic political deadlock, Bulgaria is not expected to join the euro in either 2023 or 2024," Coface stated.