site.btaUPDATED European Commission: Bulgarian Economy Will Grow by 2.8% in 2022, 2.3% in 2023

Bulgaria's real GDP will grow by 2.8% in 2022, compared to 4.2% in 2021. The growth rate will drop to 2.3% in 2023, according to the summer economic forecast for Bulgaria published by the European Commission (EC) on Thursday.

The EC made an upward revision of Bulgaria's economic growth for 2022 and a downward one for the following year. The spring forecast was for 2.1% economy growth in 2022 and 3.1% in 2023.

HICP inflation is set to accelerate to 12.5% in 2022 on the back of higher energy and food prices. In 2023, HICP inflation is expected to settle at 6.8%. The spring forecast prognosticated lower inflation values - 11.9% and 5% respectively.

In the first quarter of 2022 GDP grew by 0.8% quarter-on-quarter, with all demand components contributing to the expansion. Private consumption growth was supported by favourable labour market conditions and the sharp increase in wages in the private sector in the beginning of the year. "Consumer confidence has deteriorated starting in March 2022, suggesting lower private consumption growth for the rest of the year," the report points out.

Export of goods and services are forecast to expand in 2022. The implementation of the Recovery and Resilience Plan is set to be the main factor behind the accelerated investment growth in both 2022 and 2023.

The upward revision of the real GDP growth by 0.7 percentage points for 2022 reflects mainly the strong recovery in the first quarter of this year. The downward revision for 2023 by 0.8 percentage points is explained with the weaker external environment and tighter lending conditions, combined with the weaker real wage growth.

The strong wage increase in 2022 is set to lead to further price increases, particularly in the non-tradeable sector. In the context of less buoyant lending activity and adjusted inflation expectations, more moderate wage increases are forecast for 2023, leading to slower consumption growth.