March 30 (SeeNews) - UniCredit Bulbank said on Thursday it is keeping its projection for Bulgaria's economic growth in 2023 at 1.3%, unchanged from the previous forecast made in January, as consumers are limiting spending due to inflation and businesses are cutting back production amid worsening external demand.
The bank, however, lowered its forecast for the growth of Bulgaria’s gross domestic product (GDP) in 2024 to 2.3% from 3.3% previously, due to “stickier inflation than previously expected and a more pronounced deterioration in global monetary conditions,” it said in a quarterly economic update.
According to Bulgaria's largest lender, average consumer price inflation will ease to 11.1% in 2023, from 15.3% last year. Inflation is seen to further abate to 5.5% in 2024. The new forecast, however, is higher than the previously projected rates of 9.7% for 2023 and 4.8% for 2024.
Structural factors pushed inflation higher at the start of 2023, the bank noted. Regulators found cases where local wholesale and retail traders seemed to have unjustifiably hiked the prices of products. To make things worse, the caretaker government found itself short of tools to do much about the situation, UniCredit Bulbank noted.
Following a prolonged period of political instability, there is a good chance that a stable government can be formed in Bulgaria after the parliamentary elections on April 2, UniCredit Bulbank said. Still, a second possible scenario, one with a moderate likelihood of materialising, involves a new parliamentary election later this year, the bank added.
A failure to form a stable government would leave the country without a clear policy direction at a time when the cost-of-living crisis looks far from over, while the country's choices regarding the Russia-Ukraine war are likely to shape its future for the next several decades, the bank said.
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