Inflation at the end of 2012 will reach 3% and the average for 2012 will be 2.5%

The recovery of the economy in the country will gather more speed in the next year, say UniCredit Bulbank economists in the section, dedicated to Bulgaria in the last Quarterly Analysis of UniCredit for the economy in Central and Eastern Europe Countries. According to the analysts of the bank the positive outlook is due to the decrease in the financial market tension, the gradual winning back of foreign investors' confidence and the solid absorption of EU funds.

Individual consumption will also increase in the next year, becomes clear from the UniCredit analysis. The planned increase in the minimum salary and pensions, after the latter have been kept frozenover the last three years, should alone boost the average households’ income by a nominal 3% per year. On the other hand, the expectations for the slower increase in food prices will increase the purchasing power of the people.

"Given all that, we decided to keep our GDP growth forecast unchanged at 0.5% in 2012 and 1.5% in 2013.", the chief economist of UniCredit Bulbank, Mr. Kristofor Pavlov explained. He believes next year, recovery will face unchanged headwinds (with the noticeable exception of higher food prices), but the scale should diminish. Above all, with the euro zone crisis ebbing, confidence should continue to return. This will ease deleveraging pressure and will jumpstart investments.

Macroeconomic data and outlook

Macroeconomic data and outlook
	2010	2011	2012E	2013F	2014F
GDP (EUR bn)	36.1	38.5	39.7	41.3	43.7
Real economy - change on an annual basis (%)
GDP	0.4	1.7	0.5	1.5	2.8
Consumption	0.6	-0.2	0.6	1	2.4
Fixed investments	-18.3	-9.7	0.7	5.2	9.3
Public expenses	-0.5	-4.9	-1	0.1	0.1
Export	14.7	12.8	3.6	3.8	5.4
Import	2.4	8.5	3.4	4.1	6.5
Monthly remuneration, nominal (EUR)	331	362	384	413	446
Unemployment (%)	11.3	11.8	12.9	12.7	12

In the second quarter of 2012 the GDP rose by only 0.3% compared to the previous quarter and by 0.5% compared to the same period of the previous year. Although small, the increase is due to the increase in individual consumption and export in the second quarter by 2.4% and 3.4% respectively.

In July inflation in Bulgaria achieved its highest increase in the last four years, by 1.5% The UniCredit analysis states that the higher inflation is additionally making it harder for households to recover.

"But in the present environment of elevated private sector debt and a weak domestic recovery, the recent uptick in inflation is not entirely bad news.", Kristofor Pavlov added. Higher inflation helps alleviate borrower’s woes as it reduces the real value of debt. The bank's chief economist explains that higher inflations create more stimuli for consumption, and thus can be part of the medicine needed to end cash hoarding which is among the factors that hold back investments and growth.

The outlook is that inflation for 2012 will reach 2.5% on average and will be 3% by the end of the year. Increase in prices for next year is expected to be by 2.7% on average.

Full text of the analysis can be found on the website of UniCredit Bulbank, section About the Bank, subsection Economic Information - http://www.unicreditbulbank.bg/en/About_the_Bank/Economic_Information/index.htm

More information for media:

UniCredit Bulbank, Identity & Communications Department

Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Ekaterina Ancheva, Phone: + 359 2 9264 963, flbufsjob/bodifwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch