May 3 (SeeNews) - The European Commission said on Thursday that it has raised its forecast for Bulgaria’s economic growth in 2018 to 3.8%, from 3.7% projected in February.
"The main driver of investment growth in 2018 is expected to be the capital expenditure of the government due to the uptake of EU funds under the 2014-2020 EU programming period," the European Commission said in its Spring 2018 Economic forecast.
The Commission also improved its forecast for Bulgaria's GDP growth in 2019 to 3.7%, from 3.5% projected in February.
The main downside risk for Bulgaria's GDP growth comes from the external environment, given the openness of the economy, the Commission noted.
"On the upside, higher wages and employment growth could translate into higher demand," the Commission said. "Also, given the rise in new orders, the utilisation of production capacity, favourable credit conditions and EU funds mobilisation, investment activity could turn out even stronger than expected," it added.
Bulgaria's unemployment rate is expected to steadily decrease from 6.2% last year to 5.5% in 2018 and 5.3% in 2019.
Demand for imports is expected to be stronger than demand for exports, due to strong domestic demand and rising energy prices.
"As a result, the trade balance is set to deteriorate and the current account surplus to reduce further to 1.4% and 0.8% of GDP in 2018 and 2019 respectively," the Commission said.
Strong domestic demand is also expected to boost Bulgaria's annual HICP inflation from 1.2% in 2017 to 1.8% this year.
A fiscal surplus of 0.6% of GDP is expected in both 2018 and 2019.