It is expected that by the end of this year 0,5% deflation will be reported;

In the latest analysis by the economic team of UniCredit the forecasts for next year are positive for the entire CEE region.

Bulgaria's GDP will accelerate its growth up to 2,6% in 2016. This is one of the main conclusions made by the economic team of UniCredit Bulbank in the latest quarterly analysis. The GDP growth forecast is increased for this and the following year thanks to the significant improvement in EU funds utilization, the larger than expected drop in oil prices and the ongoing recovery of the labor market. For a second consecutive quarter the GDP growth forecast is increased from 2,1% to 2,3% for 2015 and from 2,4% to 2,6% for 2016. The expectations for this year are for an average annual deflation of approximately 0,2%. In comparison, a year earlier it was 1,4%, while the accelerated growth next year will make it possible to report inflation of approximately 0,4%.

“From a fundamental point of view, the economy seems to be well positioned for the recovery process to continue, driven by export which this year received additional support from the sustainable decrease in oil prices, the weaker euro and the ongoing recovery of the labor market“, explained Kristofor Pavlov, chief economist of UniCredit Bulbank. According to him, a significant role for the recovery of Bulgarian economy plays also the current improvement of the levels of EU funds utilization, which reached 85% as at July and is particularly encouraging considering the quite weak start of the process. In comparison, during the first four years only 15,6% of the total amount intended for Bulgaria was utilized.

Concurrently with the acceleration of the GDP growth, it is expected that its structure will improve as well. Particularly, UniCredit economists expect export to overcome the global trend for a slowdown in trade and to increase by another 3,5% in real terms next year. Yet, that would mean a moderate slowdown in the 7,7% rate which analysts forecast for the whole 2015 year. The major part of the slowdown will result from the forthcoming normalization of the interest rates in the U.S., which is expected to have a negative impact on demand for some of the country's trade partners, which are seen as too vulnerable, countries such as Serbia, Croatia and above all Turkey. At the same time, factors working in the opposite direction will be the ongoing recovery of the labor market, the impressive progress in EU funds utilization, the abundant internal and external liquidity, as well as the positive effects slowly encompassing the rest of the economy resulting from the stronger than expected drop in energy prices. All that will support the recovery process of consumer spendings as well as of investments during 2016.

"The efforts for utilization of more EU funds will also be supported by the very strong fiscal position this year, which will not only allow to secure national co-financing of all projects from the first programme period, which have to be completed until the end of the year, but also to launch some infrastructure projects from the new programme period, as initially they would be fully financed through budget funds", the chief economist of UniCredit Bulbank also states in his analysis.

An even more key role for the recovery of consumer spending will play the recovery of the labor market. For the second quarter of 2015 the unemployment rate dropped to 9,7% while employment shows 1,1% growth on an annual basis. Nearly 2/3 percent of the newly created jobs are in one of the highest paying sectors in Bulgaria: outsourced services in the field of IT, communications and business services. Against such backdrop, the acceleration in the growth rates of the actual salaries up to the impressive 7,2% in the first quarter of the year on an annual basis does not seem to be a surprise.

In the latest analysis by the economic team of UniCredit, the forecasts for next year are also positive for the entire CEE region. For the CEE EU member-states it is expected that GDP will increase by 2-3,5% in 2015.

„The CEE region has potential to cope with potential new challenges, related mostly with austerity of the U.S. monetary policy and a slowdown in the growth of some developing markets, China especially. Next year the growth in the region will remain stable and might even exceed the expectations of the analysts“, commented the chief economist of UniCredit for CEE Lyubomir Mitov.

More information for media:

UniCredit Bulbank, Identity & Communications Department

Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch