UniCredit Bulbank has revised upwards its 2022 economic growth forecast for Bulgaria from 2.7% to 3.2% of GDP, shows the bank's latest macroeconomics analysis. The strong performance was attributed to consumption and exports, which managed to fully offset the decline in investment, the bank said.
The bank's economists expect a shallow and short-lived recession at the end 2022 and in early 2023. The slowdown in growth will mainly be due to lower real income growth rates in response to expectations of higher energy and food prices envisaged in the bank's latest global scenario.
In addition, the European Central Bank is expected to undertake a larger increase in the key interest rate, leading to tighter financial conditions in the euro area and a more considerable increase in the cost of servicing loans to households and firms, compared to expectations three months ago.
Against the backdrop of a deteriorating domestic and external environment, the bank foresees a slowdown in real GDP growth to 0.5% per year in 2023, compared to an expected growth of 2% in the bank's forecast three months ago.
The economists expect the fiscal support measures, introduced in mid-2022 to mitigate the negative effects of high inflation, to be extended until the end of 2023 and additional fiscal measures equivalent to about 0.5% of GDP to be introduced as part of the government's efforts to cater to the most vulnerable households and firms, the bank said.
/MT/
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