From next year on investments will also go up

Low inflation and an accelerated GDP growth rate up to 3.3% p.a. in 2012 are some of the expectations for Bulgaria, pointed out in the latest quarterly analysis of CEE countries’ economies drafted by UniCredit’s team of analysts.

The Group’s economists believe that the whole of 2012 will be marked by low inflation, and some of the reasons for that will be the slow recovery of the domestic demand combined with the still relatively high unemployment. According to the analysis, however, inflation will continue to be a problem in Bulgaria until the end of 2011 despite the indications for a calming down in the second half of the year. “On an annual basis, consumer prices will reach their peak in June and July when inflation is expected to reach 6%, while by the end of the year it is expected to level off at about 4%“, the analysis from UniCredit says.

Because of the difficulties encountered in Bulgaria’s recovery process and the worsened prospects for global economy, the economic team of UniCredit expects that the economic growth will lose some of its momentum in the months to come. Still the forecasts for 2012 are for a growth rate of real GDP accelerated to 3.3%, from the 2.8% in 2011. Combined with the lower inflation, this will facilitate the recovery of the household sector.

“A better acquisition of EU funds and a potential permanent solution of the crisis with the public debt of Greece, which is limiting cash flows to the whole Balkan area, will be the factors expected to support an increase in investments in Bulgarian economy in 2012“, CEE report adds.

As far as public finance is concerned, UniCredit analysts recognize a positive trend. In the first four months of 2011, the budget reported a deficit of 0.7% of GDP compared to more than double shortage in the same period of 2010 (1.8% of GBP). This reflects the combination of the significant growth of 11% p.a. in tax revenues and the 3.5% shrinking of costs. The analysts expect that Bulgaria will reduce its budget deficit to less than 3% of GDP this year.

Full text of CEE Quarterly can be found on About the Bank, Economic information section

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