Financial and business news from Bulgaria

EU forecast: Bulgaria to grow real GDP by 3.5% in 2021

The EU economy will grow by 4.2% in 2021 and 4.4% in 2022. This indicates the spring economic forecast for this year.
There will be a significant improvement on the growth outlook compared to the winter 2021 economic forecast, which the European Commission presented in February. Growth rates will continue to vary within the EU, but by the end of 2022 the economies of all Member States should return to pre-crisis levels, the European Commission said.

The recovery of the European economy, which began last summer, stalled in the fourth quarter of 2020 and in the first quarter of 2021, as new public health measures were introduced to limit the rise in COVID-19 cases. But the EU and eurozone economies are expected to recover strongly as the proportion of vaccinated increases and restrictions are softened.

With regard to Bulgaria, the forecast is for an increase in real GDP by 3.5% in 2021 and by 4.7% in 2022.

Inflation will vary considerably this year as the allowed energy prices and changes in VAT rates cause significant price fluctuations compared to the same period last year. The forecast inflation for Bulgaria is 1.6% in 2021 and 2.0% in 2022.

Labour market conditions are slowly improving since the initial impact of the pandemic. But labour markets will need time to fully recover as there is the possibility of working hours to increase before companies hire more workers. The unemployment rate in Bulgaria is projected to be 4.8% in 2021 and 3.9% in 2022.

Public support for households and businesses has played a vital role in mitigating the impact of the pandemic on the economy, but has led to an increase in Member States' debt levels. In the EU, the public debt-to-GDP ratio is expected to reach an all-time high of 94% this year, before declining slightly to 93 per cent in 2022. Bulgaria is expected to decrease to 24.5% of GDP in 2021, mainly due to the positive impact of higher economic growth, and to 24% in 2022.

Prospect-related risks are high and will remain so while the shadow of the COVID-19 pandemic hangs over the economy. Changes in the epidemiological situation and the efficacy and effectiveness of vaccination programmes could prove more positive or more negative than foreseen in the baseline scenario of this forecast.