(MENAFN- The Journal Of Turkish Weekly) Driven by low fuel prices and firm exports Bulgaria’s growth will register 2.2 per cent for 2015 followed by a drop to 1.5 per cent in 2016 and another increase back to 2.0 per cent in 2017 the European Commission predicted in its winter European Economic Forecast.
The report blames this year’s drop on several factors including a slowing down of projects co-financed by the EU.
The forecast for 2016 is lower than the one issued by the Bulgarian government which predicted growth of 2.1 per cent in this year’s state budget.
“Risk aversion an unsupportive business environment and restrained foreign capital inflows are set to curb investment growth in 2016-17 despite favorable financing conditions” the Commission noted.
In January ten commercial chambers representing key foreign investors in Bulgariawrote an open letterto the authorities urging them to help business by speeding up judicial reform. Bulgaria dropped five places to 60th position in the2016 Global Index of Economic Freedomput out by the Heritage Foundation and theWashington Post mainly due to concerns over property rights and corruption.
Georgi Ganev director of the Economic Research Programme of the Sofia-based Center for Liberal Strategies said the predicted drop in economic growth is no surprise.
“The pace of growth in 2015 was higher as a result of the low price of the euro and of petrol” he told BIRN.
Ganev added that EU funds a main driver of Bulgaria’s economy since it joined the European club are still contracting for the new program period 2014 to 2020.
In the past two years the country absorbed the remaining funds from the previous period at top speed which was a stimulus for businesses.
The EU expects domestic demand in Bulgaria to pick up in 2016 and the unemployment rate to fall to 9.4 per cent in 2016 and 8.8 per cent in 2017.
The government deficit is estimated to fall to 2.5 percent of GDP in 2015 having jumped to 5.8 per cent in 2014 as a result of one-off support given to the financial sector following the collapse of the Corporate Commercial Bank.
Compared to the original deficit target of 2.8 per cent of GDP in 2015 the better outcome reflects higher tax revenues mostly attributable to improved tax rate collection the EU points out. The headline deficit is forecast to fall to 2.3 per cent of GDP in 2016.
Geopolitical uncertainties and stagnation in Bulgaria's main trading partners pose an ongoing risk to exports and growth because of the economy’s high degree of openness the Commission warned.