Bulgaria Cuts GDP Growth Forecast on Demand, Unemployment

Bulgaria cut its economic growth forecast for this year to 1 percent because of low domestic consumption and high unemployment.

The economy will expand 1.8 percent in 2014 and 2.9 percent in 2015 after growing 0.8 percent in 2012, the Finance Ministry in Sofia said in its three-year fiscal plan published on its website. The previous government, which resigned on Feb. 20 after protests against high utility bills turned violent, had forecast economic growth of 1.2 percent under a pessimistic scenario and 1.9 percent under an optimistic one.

President Rosen Plevneliev appointed an interim government led by Marin Raikov on March 12 to organize and hold early elections on May 12. Bulgaria survived the euro-area debt crisis without borrowing from abroad and sustained tight spending policies, which led to anti-austerity protests.

This year’s forecast is based on “declining domestic consumption observed at the end of 2012, which will continue in the beginning of 2013, as well as on expectations of increased exports” as the European economy recovers in the second half of the year, the ministry said.

Unemployment is expected to rise this year to more than 13 percent and fall to 12.8 percent in 2014, the ministry said. The number of jobless people rose to 12 percent in February, according to the Employment Agency.

The interim government raised this year’s budget deficit forecast to 1.4 percent of gross domestic product from 1.3 percent, after a gap of 0.5 percent in 2012, the ministry said. The shortfall is forecast at 1.3 percent in 2014, 1 percent in 2015 and 0.8 percent in 2016.

Bonds

The country plans to sell domestic bonds worth as much as 1.3 billion lev ($864 million) a year from 2014 to 2016 to finance the budget, public infrastructure projects and repay debt, the ministry said.

The next government will need to sell bonds on global markets to redeem $1.08 billion in global bonds due in 2015, according to the ministry. Bulgaria’s public debt was 17.6 percent of GDP in 2012.

Bulgaria’s average inflation will slow to 1.8 percent next year from 2.4 percent in 2012. Foreign direct investment is estimated at 1.578 billion euros ($2.1 billion) this year, after 1.48 billion euros in 2012, the ministry said.

“The priority of the interim Cabinet in terms of fiscal and budget policy is to guarantee financial stability and the long-term sustainability of public finances,” the ministry said.

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