Weak economic growth, increased consumption, almost frozen exports, more government contracts. In brief, these are the expectations of the Bulgarian Ministry of Finance in its autumn macroeconomic forecast for the next three years. The autumn forecast is crucial, because it is used in the preparation of the national budget for 2017. The ministry predicts a real 2.5% growth of GDP for next year and slight acceleration over the next two - up to 2.7%. The Bulgarian treasury is a bit more conservative than the IMF, which predicts 3% growth for 2016 and 2.8% for next year. Bulgarian economy could expect a depressed export growth due to a projected slowdown in developed economies, according to the ministry. As a result, export companies may have fewer orders and the wages of their workers will grow more slowly. The national statistical office recently recorded a decline in Bulgarian exports but it was limited mainly to countries outside the EU.
Bulgaria's economic growth in 2017 will come primarily from increased consumption. The assumption is based on an expected increase of disposable income on the back of a rise in the regulated minimum wage and salary growth in the private sector which already experiences labor shortages. EU funds will be the second driver of Bulgaria's economic growth as new EU financed projects will kick off and public spending will increase substantially.
Increased domestic consumption will be reflected in a rise in imports and by 2019 net exports will contribute only 0.2 pp to the GDP growth.
The unemployment rate is expected to reach an average of 7.3% next year. Increased retirement age will prevent a faster decline of the jobless rate.
"In 2017 the rate of change of income growth will slow to 5.4%, but will remain high as a result of acceleration of the actual performance, positive change in prices and demand for labor in the country," the Ministry of Finance report says. By the end of 2019 productivity is expected to grow by around 2% a year.