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Sep 27, 2023 10:04 EEST
September 27 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) on Wednesday raised its projection for Bulgaria's real economic growth in 2023 to 1.6%, marking a second consecutive increase of 0.3 percentage points since its May forecast.
The improved 2023 forecast, even in the face of weaker consumption, reflects greater investor confidence after the April elections resulted in a coalition government, raising hopes of much-awaited political stability in the country.
In 2024, Bulgaria's gross domestic product (GDP) is expected to grow 2.6%, which is 0.3 percentage points slower than the rate forecast in May, EBRD said in the September issue of its semi-annual Regional Economic Prospects report.
This acceleration in real economic growth will be supported by a more tempered inflation, stronger absorption of EU funds and heightened demand from overseas trading partners.
"Key downside risks to the forecast are another energy price shock and protracted weakness in key trading partners, while political risks remain elevated," EBRD noted.
Bulgaria's GDP grew by 3.4% in 2022, but by only 1.9% in the first half of this year, in a sign of an economic cooldown driven by lower private consumption due to inflation and a 0.8% year-on-year decline in export volumes, particularly in raw materials and power.
In recent months, Bulgaria has shifted from being an electricity exporter to becoming an electricity importer. This change happened because power prices rose due to a decrease in coal and nuclear electricity production in the country, while overall energy market prices dropped to levels similar to those before the war due to reduced consumption and a milder winter season.
A decline in manufacturing output since March has also had an impact on the decrease in exports, according to the lender. The 6.7% reduction in imports offset the impact of the decline in exports on GDP.
However, investment is showing signs of recovery in the early months of 2023, following three years of underwhelming performance.
EBRD anticipates that the Southeast Europe (SEE) region, encompassing the economies of Bulgaria, Greece, and Romania, will continue to follow the performance observed in the first half of the year. This is expected to result in a real economic growth rate of 2.0% in 2023, which is 0.3 percentage points lower than the May projection. Subsequently, GDP growth in the region is forecast to increase to 2.8% in 2024, marking a 0.2 percentage point reduction compared to the May forecast.
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