In its latest Spring 2016 European Economic Forecast the European Commission assessed positively Bulgaria’s economic development and boosted its expectations about the country’s economic growth in the next two years.

This was very good news for Bulgaria, because usually this country has been receiving mainly criticism, remarks, reproaches and recommendations from Brussels and this time the European Commission increased its prognosis about the growth of Bulgaria’s gross domestic product to 2% on an annual basis. Despite the increased forecast, however, the EC practically admits that the Bulgarian economy has slowed down and it is likely to mark a much lower GDP growth as compared to the 3% increase in 2015. Moreover, Estonia is the only new EU member state which is expected to develop at a slower pace than Bulgaria. In other words Bulgaria is the last but one in the group of these countries in terms of economic development.

However, the revised forecast of the European Commission about that country’s economic growth contains a series of positive assessments, too. Unemployment in Bulgaria will continue to decrease and is expected to reach 8%, which is a very reasonable level. Exports are expected to increase, deflation has slowed down recently and the country is likely to mark a healthy (low) inflation. There is more good news-observers from Brussels expect that the Bulgarian budget deficit would decrease.

Against the backdrop of the relatively positive perspective about the development of the Bulgarian economy, Brussels sent a series of warnings and recommendations to that country, too. The media in Bulgaria do not miss to inform even about the smallest projects fulfilled with European financing, as well as about the slightest problems occurring during the allotment and the absorption of these funds. However, the increased public interest towards that issue is quite reasonable, because over 70% of the public investments in Bulgaria are made with EU funds. This, according to the European Commission, means that Bulgaria is highly dependent on the European financing. The expected slowdown of the Bulgarian economy in 2016 will be mainly due to the lower absorption of money under the EU cohesion funds, the European experts explain. However, the forecasted slowdown in the GDP growth will be also influenced by the meager inflow of foreign capital in Bulgaria, which was also mentioned in the EC’s revised spring forecast about the development of the Bulgarian economy. The foreign capital is what finances new investments in that country, because the local capital is still insufficient and often speculative.

Still, the Bulgarian economy is expected to develop in the future, yet at a low pace. However, this country needs to mark a higher GDP growth per capita, in order to make Bulgaria’s citizens wealthier and more solvent and reach the average EU standards. Unfortunately, the Bulgarian economy is highly dependent on external factors, because the local market is too small to absorb larger production volumes. In other words, the well-being of that country and its citizens does not depend on the measures of the local cabinet and the business environment only, but also on the state of the international markets and the processes taking place there. The business activity in many countries remains low and hampers the import of foreign merchandise, including Bulgarian goods, which slows down the Bulgarian economy as well.

English version: Kostadin Atanasov