Brussels expects a substantial decline in Bulgaria’s GDP to 1.4%. The Eurozone will fall back into recession

The European Commission sharply lowered its forecasts for the EU, the Eurozone and for Bulgaria. Brussels expects Bulgaria’s economic growth to reach just 1.4%, which means that, instead of accelerating, our economy will slow down in 2012, compared to 2011. Last year, the expected economic growth was 1.8%. Moreover, experts set in their autumn forecasts 0.9% more optimistic economic figures – growth of 2.3% for 2012. Growth planned in the State budget GDP was 2.9%.

Following the strong growth rate of exports in the last two years, domestic consumption will increase and become a major engine of growth in the country’s economy this year, said experts from the EC. It is recognised, however, that the imbalance in the private sector is improving rapidly, the current account is recording a surplus and the ratio of private debt to GDP has started to decline. The dependence of the financial sector on external resources is also declining. Experts believe that the labour market will stabilise in 2012 and investments will be supported by public sector projects. The average annual inflation rate will be around 3%.

Brussels considers the long-lasting stress on financial markets risky - it might delay the recovery of consumption and investments. In economic forecasts, the uncertainty of households is also reported as a risk. If they start withdrawing their savings, this could lead to stronger, accelerated growth in domestic demand.

Despite the seemingly more pessimistic estimates, against the background of Europe, Bulgaria’s  key economic figures are pretty good. There will be zero growth in the EU, the Eurozone will fall back into recession with a drop of 0.3%. This is a decline of 0.6% for the Eurozone and of 0.8% for the EU, compared to the autumn forecast. "The Eurozone is heading towards a second recession in a three-year period, while the entire European Union will stagnate," said Olli Rehn, European Commissioner for Economic and Monetary Affairs, during the presentation of the report. The last recession in the Eurozone was in 2009, with a decline of 4.3%. The World Bank and the IMF also believe that the economy of the Eurozone will shrink by 0.3% -0.5%.

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