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Bulgaria’s economy expected to grow moderately in 2019

Tuesday, Feb 12, 2019

Many international research centers and global institutions have already made their winter economic forecasts. The World Bank, the International Monetary Fund and the European Commission recently published their forecasts as well. The Bulgarian research centers, including the prestigious Institute for Market Economics, did the same.

These forecasts were made in times of changing economic cycle and the differences between the analysts mainly boil down to the depth and the speed of the expected slowdown of the economic growth in Europe and Bulgaria. All analysts and observers contend that in 2019 the Bulgarian economy will continue to grow, yet at a slightly lower gear. Economic experts are unanimous that the growth of the gross domestic product will reach 3.1%-3.7% which is a good performance against the backdrop of the economic development in the Eurozone, where, according to forecasts the GDP growth will be under 2%. Even the regular consumers in Bulgaria share this opinion. According to the latest researches, consumer confidence in Bulgaria has increased, which is of great importance, because consumption is among the main engines of economic growth in this country. Moreover, Bulgaria’s Premier Boyko Borissov recently said that time has come to raise incomes and promised that the salaries in the public sector will see a new 10% increase next year after the 10% increase on January 1 this year. These words raised expectations of higher consumption which encourages the business sector.

Bulgaria desperately needs higher incomes and consumption, because the latest economic data show that this country is last in Europe in terms of the GDP growth per capita ratio- only EUR 7,300, whereas the average GDP growth per capita in the EU is EUR 15,000. These figures mean lower demand, weaker sales and manufacture in Bulgaria which is due to the low purchasing power of the Bulgarian population. The promised increase of the salaries in the public sector is not huge, but it very likely to trigger an increase of the wages in the private sector as well.

In 2019 experts expect higher public investments in infrastructure, i.e. increased public spending. This is proved by the fact that at the end of last year the Bulgarian cabinet distributed nearly EUR 1 billion from the budget surplus for the fulfillment of transport and infrastructure projects in 2019 and the coming years. Absorption of EU funds is also expected to increase, which will stimulate various industrial sectors.

If Bulgaria receives an invitation to join the ERM2 mechanism this summer as a first step towards the Eurozone accession, the Bulgarian economy will become more stable. It would also stimulate the Bulgarian banks which registered nearly EUR 1 billion profits in 2018 and are now waiting to finance wise and reasonable projects.

The current optimism about the economic development of this country in 2019 is based on the recent positive developments. However, this optimism confines to the restricted potential of the Bulgarian economy, which is very dependent on exports. Moreover, the economy has been experiencing huge deficit of workforce recently. The shortage of personnel in this country is due to the fact that salaries are low and not all companies operating in this country regard labor as the most valuable asset. That is why hundreds of thousands of Bulgarians emigrated in search of a better life abroad. Now this negative trend should reverse, but things cannot happen in a blink of an eye. The business now has to increase salaries, in order to make the Bulgarians stay and persuade the emigrants to return to their home country.

Source: bnr.bg