• In 2018 unemployment will decrease to its lowest level in almost 30 years;
• Bank analysts forecast a 4% annual GDP growth.

The growth acceleration of the Bulgarian economy is still not complete, UniCredit Bulbank's Economics Team forecasts in its last quarterly analysis of the CEE economy. Although in 2018 the expected annual GDP growth decreased slightly to 4%, the Bulgarian economy is still close to reporting its highest growth rate since the global financial crisis.

‘’We expect that the actual GDP growth will reach 4% on an annual basis, aided by income growth, the increase in household consumption financed by loans as well as the revival of housing construction along with the utilization of more EU funds. These factors are expected to promote a sufficiently widespread and sustainable growth so that there will only be a negligible slowdown in 2019 to 3.9% on an annual basis, the analysis indicates.

The slight decrease in growth that was initially forecast to reach 4.4% on an annual basis is the reason given by experts for the weaker than expected economic activity data concerning the first quarter of the year as well as the forecast about higher prices of crude oil. It is precisely the impact of crude oil prices on consumer prices that will lead to a slightly weaker growth of individual consumption, while as far as the results of investments and net export are concerned, no significant change is expected in comparison to the previous forecast.

The unemployment rate is headed towards an all-time minimum

The job market situation continues to improve, the analysis shows. In the first quarter of 2018 the economy created 63 000 jobs more than it did the year before. They were equally distributed between export-oriented sectors of the processing industry, transport and outsourced business services, on the one hand, and those oriented towards domestic demand – the quickly developing sectors of construction and real estate management. 

In this way, the unemployment rate for the first quarter of the year shrunk to 5.7%  or to just approximately 190 000 of unemployed people – values which are very close to the historical minimum reported at the end of 2008. ‘’We expect that in 2018 the unemployment rate will reach an average of 5.4%, which would be the lowest level since 1989. In our opinion, unemployment rate improvement is unlikely to remain at the levels we have observed so far during the ascending cycle since the reasons for unemployment are to a large extent structural, for example, skills mismatches and the relatively low job mobility”, UniCredit analysis indicates.

 

 

 

It is encouraging that a considerable number of jobs created since the start of the year are well-paid jobs in the sector of outsourced business services. This sector is becoming more and more significant for the economy as a continuation of the trends over the past years. At the same time, the average monthly salary increased by 7.1% on an annual basis during the first quarter, which is slower than the double-digit growth rates reported in the second half of 2017. 

Inflation has been stabilized to around 2% on an annual basis since the start of the year

In April consumer inflation slowed down to 2.0% annually after a peak of 3.0% in November 2017. The expectations of UniCredit Bulbank's Economics Team are that the inflation will continue its tendency towards gradual upward-movement, reaching an average value of 2.7% during this year. This result will be in line with the expected slowdown in the increase of basic prices during the second half of the year after the positive effect of one-off factors wears off, while, on the other hand, some prices of services are expected to rise. At the same time, the better part of the acceleration of inflation during this year is expected to be a result of higher energy prices and, more specifically, crude oil prices.

The forecast of UniCredit Bulbank’s Economics Team is available on the website of the bank.

 

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Additional media information:

Victoria Blajeva, tel +359 (0) 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Beatris Nikolova, tel +359 (0) 2 9232 528, cfbusjt/ojlpmpwbAvojdsfejuhspvq/ch

Ekaterina Ancheva, tel +359 894 518 193 , flbufsjob/bodifwbAvojdsfejuhspvq/ch