July 4 (SeeNews) - Bulgarian lender Unicredit Bulbank said on Monday it has lowered its outlook for the country's economic growth in 2016 and 2017 to 2.5% and 3.0% respectively following Britain's vote out of the European Union.
The negative effects on the Bulgarian economy will come through three main channels - foreign trade, investments and finances, of which foreign trade will have the greatest weight, the lender said in a press release.
Brexit's influence through foreign trade will be mostly indirect, as Britain absorbs only 2.5% of Bulgaria's exports.
However, the indirect effects will be more significant as the Bulgarian economy is small and open and as most export-oriented companies in Bulgaria are part of West European production chains. The slowdown in foreign trade is expected to be felt in the last few months of 2016.
Brexit will affect investments in Bulgaria to a lesser extent as a result of expected decline in global investment demand, and a certain slowdown in capital flows to the country, including FDI, could be expected.
Brexit's effect through the financial channel will be the most modest one thanks to the fact that Bulgaria's economy remains resistant to external shocks in the absence of new or exacerbation of existing macroeconomic imbalances, according to Unicredit Bulbank.
Due to a very favourable combination of strong fiscal parameters, moderate current account surplus, generous international reserves and declining external financing needs there will be no noticeable change in the conditions under which the country and private Bulgarian companies receive funding from abroad, it added.
In March, Unicredit Bulbank raised its outlook for the country's economic growth in 2016 and 2017 to 3.4% and 3.6% on the back of a slump in energy prices and stronger than previously expected labour market recovery.