June 8 (SeeNews) - Bulgaria's real economic growth will slow down to 1.9% in 2023 and then accelerate to 3.2% in 2024, the Organisation for Economic Co-operation and Development (OECD) said, affirming its forecast made in April.
The country's economy will be mainly affected by global headwinds, such as a slowdown in its main trading partners, as well as lower private consumption and employment growth, the OECD said in its June 2023 Economic Outlook published on Wednesday.
At the same time, the disbursement of EU funds, which was delayed in 2022, is expected to catch up in 2023, boosting the economy.
"As a small open economy trading mainly with other EU countries, Bulgaria is being affected by the slower growth of export demand. Prolonged political instability has delayed key policy reforms. More effective management and roll-out of EU funds would support activity going forward," the OECD said.
Consumer inflation is expected to decelerate to 9.5% on average in 2023, before easing further to 4.4% in 2024. However, high wage increases could potentially impact inflation levels.
Despite the potential challenges, the labour market is seen to remain strong. The OECD projects only a marginal rise in unemployment in 2023, while nominal wage growth is forecast to gradually decline, aligning with the inflation rate.
Looking ahead, economic growth is expected to regain momentum in 2024, driven by an increase in export demand and both public and private investments, which will be supported by EU funds, the OECD added. Nevertheless, higher long-term interest rates on government bonds could potentially affect economic activity, whereas investments face risks stemming from deteriorating financing conditions and political uncertainty.
"Strengthening the convergence process requires pursuing and deepening reforms to encourage and intensify investments in infrastructure, reduce administrative burdens and strengthen efforts to fight corruption," the OECD said, emphasising the need for Bulgaria to also address labour shortages and meet demand resulting from the ageing population.