Bulgaria projection note OECD Economic Outlook November 2022

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Bulgaria GDP growth is projected to slow to 1.7% in 2023 before rebounding to 3.1% in 2024, supported by investments from EU funds. Exports will be adversely affected by the deteriorating macroeconomic situation in Europe, while high energy prices and rising interest rates will weigh on consumption. Inflation will slowly decline amidst stabilising energy prices and subdued economic activity. Energy supply is secured thanks to low dependence on gas, a new pipeline, and a position as a net exporter of electricity. Bulgaria is assumed to enter the euro area at the start of 2024. Effective management and roll-out of EU funds is required to support activity and to return to the pre-crisis convergence path towards OECD-average per capita incomes. Support packages, including price caps on electricity along with VAT and excise tax reductions on gas, have shielded consumers and businesses from rising energy prices, but the measures should be better targeted and designed to preserve incentives for energy savings. Investments in renewable energy need to be encouraged as they would help to align efforts to decarbonise the economy and address energy security concerns. Bulgaria faces weaker growth and high inflation GDP growth remained robust in the first half of 2022 as exports remained strong and inventories surged. Business confidence has softened slightly, signalling increased uncertainty amid heightened energy prices and expectations of rising interest rates. High inflation is weighing on private consumption, but consumer confidence has improved after an initial drop in 2022. Labour shortages are significant, and unemployment remains low. In contrast with most OECD countries, real wage growth has held up albeit at a slower pace due to high nominal wage increases and regulated energy prices.

Bulgaria

1. Business confidence is expressed by the total business climate indicator, covering industry, retail trade, construction and the service sector. 2. Average balance of opinions about selling price expectations in the business surveys for industry and retail trade. Source: National Statistical Institute. StatLink 2 https://stat.link/4ambkr

OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022


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Bulgaria projection note OECD Economic Outlook November 2022 by OECD - Issuu