GDP growth forecast for this year is 1.7% and for 2014 – 2.8%.

Bulgaria’s economic recovery will be led by individual consumption. In order to accelerate growth Bulgaria also needs more investments. These are some of the main findings in the latest quarterly analysis by UniCredit Bulbank’s team of economists. To a lesser extent recovery will also by influenced by exports and gross fixed capital formation (GFCF).

In the opinion of UniCredit Bulbank’s economists exports and GFCF will be a tad weaker compared to the forecasts of three months ago. The reason is that it will take slightly longer for demand in the eurozone to begin mproving. At the same time the analysis points out that because of the snap elections in Bulgaria companies will remain longer in a “wait and see” mode.

“In the first and second quarter of the year growth will be limited and in the third and fourth ones the economic recovery will gain momentum,” said Kristofor Pavlov, UniCredit Bulbank’s chief economist. GDP growth forecast for this year is 1.7% and for 2014 – 2.8%.

The market analysis clearly indicates that Bulgaria needs more investments in order to support the acceleration of economic growth. The bank’s team of economists considers that the economic policy of the next government, regardless of its composition, should combine preserving sound macroeconomic policies with efforts for accelerating structural reforms and avoiding any back-pedaling on EU funds absorption and with some carefully designed fiscal stimuli.

More than anything else, these stimuli need to focus on those investments which have the strongest potential to improve the capacity of the economy to produce more goods and services in the long run while also boosting demand in the short run. In addition, importantly, the scale of these fiscal stimuli should be carefully calibrated so that there are no risks to the sustainability of public sector finances.

The analysis of the country’s economy shows that the unemployment rate in the first half of the year will not go down significantly. In the end the year unemployment is expected to ease to 11.9% thanks to the growth enhancing fiscal stimulus, moderately stronger exports and acceleration of EU funds absorption.

In the economists’ view the short-term softening of capital flows channeled in Bulgaria and political turmoil is likely to have no negative implications on the country’s long-term capacity to attract investments. However, this is the scenario with calming of the political situation after the elections.

The complete analysis of Bulgaria’s economy is available on UniCredit Bulbank’s website.

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