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EU Commission cuts Bulgaria's 2022 GDP growth forecast to 2.1%

EU Commission cuts Bulgaria's 2022 GDP growth forecast to 2.1% European commission.

SOFIA (Bulgaria), May 17 (SeeNews) - The European Commission said that it expects Bulgaria's real gross domestic product (GDP) to grow by 2.1% in 2022, yet again lowering its interim projection of 3.7% made days before the outbreak of the war in Ukraine.

With the ongoing military conflict driving already surging energy commodity prices even higher, businesses are set to curtail wage growth and investments, the EC said in its Spring 2022 Economic Forecast published on Monday.

In February, the Commission lowered its forecast for Bulgaria's GDP growth by 0.4 percentage points (pp) compared to its November projection.

"The effect of the phase-out of most pandemic-related measures is expected to be partially offset by measures put in place in response to high energy prices, aid to people fleeing the war in Ukraine and pension updates," the EC said.

Looking ahead, the EC forecasts Bulgaria's real economy to grow by 3.1% in 2023, as public investment, supported by funding from the EU's Recovery and Resilience Facility (RRF), fully compensates private sector passivity and the outlook for external demand improves.

Rising inflation, which was already quickening in the second half of 2021, is seen to erode disposable incomes and drive down consumer demand in the current year. This will be compounded by issues of supply chain security as EU sanctions on Russia pose challenges for the production sector.

"The direct exposure of Bulgarian goods exports to Russia and Ukraine is relatively limited, at 1.3% for each country in 2021. Nevertheless, the overall negative effect of the war on external demand is set to limit export dynamics," the EU executive body explained. It added that Gazprom's decision to cut off natural gas supplies to Bulgaria in April will lead to a one-off gas price increase as alternative sources are projected to offset the supply gap.

Driven by energy and commodity price pressures, consumer price inflation is expected to reach 11.9% in 2022, before abating to 5% in 2023, the Commission said.

Bulgaria's GDP is estimated to have increased by 4.1% last year, up from 4% projected in the Winter 2022 Economic Forecast.

For the bloc as a whole, the EC revised downwards its economic growth projections while pointing to expectations of quickening inflation as the war has added to already existing stumbling blocks to growth.

Bulgaria's GDP grew 4.7% year-on-year in the fourth quarter of 2021, following a 4.6% increase in the third quarter, the National Statistical Institute said in March, citing preliminary data.

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