22.02.2013

The EC expects the EU economy to begin to recover this year. The published today EC winter forecast projects low annual GDP growth in 2013 of 0.1% in the EU and a contraction of 0.3% in the euro area. The forecasted growth in 2014 is 1.6 and 1.4% respectively. Despite the expected recovery this year weak economic activity at the end of last and the beginning of the current year will continue to have a negative impact on labour markets. The decrease in financial market stress indicates more balanced risk distribution for the European economy at the moment.

On the background of the downward revision in the forecast for most of the new EU Member States and the EU as a whole, the forecast for Bulgaria compared to the autumn of 2012 remains unchanged. GDP growth is projected to recover gradually to 1.4% in 2013 and further to 2% in 2014. The recent growth pattern is forecast to continue, with domestic demand leading the recovery. For 2013 this is the sixth highest growth in the EU after Latvia, Lithuania, Estonia, Romania and Malta.

It is expected that the 2012 trends will be sustained and household consumption is forecast to expand further in 2013-14, assuming a continuous increase in real incomes and a gradual recovery in household confidence. Investment would be initially driven by public sector projects funded by the EU and a modest growth in credit to private sector. Exports are expected to recover from the second half of 2013. The labour market is forecast to turn to an only sluggish recovery, employment growing by 0.6% in 2014. Assuming a stabilisation of global energy and food prices going forward, headline HICP inflation is expected to level off at 2.6% in 2013 and 2.7% in 2014.

According to the EC Bulgaria's fiscal position will stay strong. The general government fiscal deficit is forecast to have improved markedly in 2012 driven by exceptionally strong VAT revenues, which were boosted by strong domestic demand, imports and measures to improve tax compliance. The measure of the Government to improve collection (the connection of traders' fiscal devices to the NRA) is highly appreciated. The fiscal deficit is set to weaken slightly to 1.3% in 2013 related to raising pensions as of 1 April, but to revert back to 1% of GDP in 2014. General government gross debt is forecast to decline in 2013 from the previous year and settle at 17.3% of GDP in 2014.

GDP, percentage change compared to previous year