Analyses of the current conditions of the Bulgarian economy and forecasts for its development until the end of the year were published these days by several prestigious institutions - the National Statistical Institute, the Bulgarian Development Bank, and Raiffeisenbank Bulgaria. IMF managing director Christine Lagarde did not mention Bulgaria, but voiced her concerns about a 3-percent decline of the growth of the global economy. This forecast naturally applies to Bulgarian economy, which is highly dependent on international markets.

All analysts focus on the impact of Bulgaria’s economic and political instability on the economic situation, business environment and the results of the economic activity. Official forecasts predicted a modest 1.8-percent growth of the country’s GDP this year, which is now unlikely to be achieved and a growth of 1.6 percent will be marked in the best case. There are no factors that could give a sufficient boost to Bulgarian economy, observers say and remind of the financial difficulties of the country, the growing budget deficit and delayed revenues, skyrocketing public spending and lack of foreign investment. Insufficient economic growth and rising deficits in many sectors will inevitably force authorities to update the budget in the direction of curbing expenses and providing fresh money to the state through emitting a new debt, analysts say.

Experts from the Bulgarian Development Bank pay attention to another troubling phenomenon in the country’s economic life. They say that the deteriorating situation is the reason for the actual freezing of salaries in the private sector over the past 12 months. Against the backdrop of stagnation and lack of optimism for the coming months, the bank predicts further stagnation where wage growth is concerned, which will inevitably affect consumption and therefore the entire economic activity. Speaking about public finances, economists say that the crisis in the Corporate Commercial Bank, which was placed under special supervision, is not over and that it threatens both the banking system and public finances in the country due to the allegedly enormous debts of this financial institution and the need to find money to pay them. In this respect it is possible that the budget deficit, which is already approaching 500 million euros, could rise abnormally and even exceed the allowed EU limit of 3 percent of GDP as experts reiterate the need for a revision of the budget this year. Raiffeisenbank shares a similar view, pointing out that in the middle of the year the budget deficit was already approaching the red line, reaching 2.8%.

Analysts also pay attention to the serious issue of high unemployment throughout Europe. Seasonal growth in employment during the summer months mainly under the influence of tourism has led to a decrease in unemployment to just over 10%, which is similar to the level in the Eurozone. But this is just a temporary phenomenon and significant recovery of the labor market is not expected, according to economic experts, pointing out that before the beginning of summer the unemployment rate exceeded 12%. 

Additional uncertainty about Bulgarian economic performance by the end of the year comes from difficulties in the energy sector which has accumulated huge debts. The healthcare system experiences an acute shortage of funds since Brussels stopped financing of a number of projects, which now rely on the state budget. The country is currently run by a caretaker government, which has limited powers and a term in office of 2-3 months. Therefore one of the most important conditions for the implementation of radical measures and reforms is missing – stable and legitimate state power. So far, the efforts of this government are limited to temporary and urgent solutions to the most pressing problems without much analyses of their long-term impact on the economy. The latest example is the internal government loan of EUR 150 mln. which actually made Bulgaria reach the EU deficit limit.

English: Alexander Markov