June 9 (SeeNews) - Bulgaria's real economic growth will slow down to 2.5% in 2022 and slip further to 2.25% in 2023, the Organisation for Economic Co-operation and Development (OECD) said, lowering its December 2021 projection of 4.2% expansion in the current year.
The slowdown will be compounded by surging inflation resulting from the war in Ukraine, the OECD said in its June 2022 Economic Snapshot of Bulgaria.
Infrastructure investments funded by the European Union and government anti-crisis measures are expected to somewhat mitigate negative macroeconomic circumstances, according to the OECD.
"Soaring energy and food prices, growing uncertainty and supply difficulties for certain raw materials will weigh on activity and only be partly offset by the expected increase in public investment and the measures taken by the government to protect households from rising prices."
Consumer inflation is expected to quicken to 14.1% on average in 2022, before easing to 8.5% in 2023, further slowing down to 6% by the end of next year, the OECD forecast.
The Bulgarian economy will be affected by supply challenges in the construction sector, the inflow of refugees against the backdrop of an expected fall in tourist visits from the significant Russian and Ukrainian markets together with the potential effect on the energy sector of Russia cutting off natural gas supply in April, although guaranteed deliveries of liquefied natural gas (LNG) and more deliveries of gas from Azerbaijan through the planned Greece-Bulgaria interconnector are likely to prevent future shortages.
"Protecting low-income households against rising energy and food prices with targeted aid, such as cash transfers, would be more effective than freezing tariffs, generalised subsidies or a VAT reduction, and also avoid distorting price signals," the OECD noted, while highlighting the need for Bulgaria to promote the energy transition and deploy EU funds in boosting renewables use so as to guarantee better energy security.