October 6 (SeeNews) - Bulgaria's real gross domestic product (GDP) is expected to grow by 3.7% in 2021, the World Bank said, raising its projection made in June by 1.1 percentage points.
The country's economy is forecast to speed up to 3.8% in 2022, before slowing down to 3.6% in 2023, the World Bank said in the fall 2021 edition of its Europe and Central Asia Economic Update report published on Tuesday.
Recovery to pre-crisis levels is likely to happen in 2022. In the short term, the biggest risk to the outlook is the slow pace of COVID-19 vaccination in Bulgaria - the slowest in the EU to date, the World Bank noted.
"Another key risk in the short term is political instability. The country is heading towards another round of early elections in the autumn following snap elections in April and July 2021, which failed to produce a ruling majority," the World Bank added.
Last month, Bulgaria's president Rumen Radev scheduled a snap general election for November 14. The parliamentary elections will take place together with the presidential election on November 14 to save time and money, the president said at the time.
Following a contraction of 4.2% in 2020, Bulgaria's economic recovery gained momentum in the second quarter of 2021 with GDP growth going into positive territory at 9.6% on the year. The key growth drivers included a 20.3% rise in exports and a notable increase in domestic demand and investment growth.
"As imports have been recovering at a faster pace than export, the current account balance moved in the red in the second half of this year and is likely to stay there in the medium run, shrinking to -3.4 percent of GDP in 2023."
The report showed that the World Bank's expectations about inflation in Bulgaria remain unchanged in comparison with the prediction made in June. The country's consumer price inflation is projected to reach 3.2% this year before accelerating to 3.3% and 3.4% in 2022 and 2023, respectively.
Inflation edged up to 3.0% year-on-year in July, due primarily to the fuel price spike. Yet, household incomes have been growing faster in the second half - by 7.7% on the year, due mostly to a significant increase in pension income, the report read.
"This suggests a real increase of incomes this year, which will become more pronounced going forward, because of base effects," the World Bank also said.