July 14 (SeeNews) - The European Commission said on Thursday that it projects Bulgaria's real gross domestic product (GDP) to expand by 2.8% in 2022, raising its May forecast of 2.1% to reflect the country's stronger-than-expected performance in the first quarter.
At 2.3%, economic growth in 2023 will be 0.8 percentage points (pps) slower than what the Commission projected in May, the EU's executive body said in its Summer 2022 Economic Forecast.
"The weaker external environment and tighter lending conditions, combined with the weaker real wage growth, explain the downward revision for 2023. The strong wage increase in 2022 is set to lead to further price increases, particularly in the non-tradeable sector," the Commission said, adding that as lending activity becomes less buoyant and inflation expectations are adjusted, more moderate wage increases are likely in 2023, which will slow down the growth in consumption.
Bulgaria's national Recovery and Resilience Plan (RRP) is seen as the main driver of stronger investment growth this year and in 2023. Export of goods and services, in particular tourism, are expected to expand in 2022.
Consumer confidence growth is expected to remain lower through the end of 2022, after starting on a downward slope in March.
The Commission also raised its forecast for Bulgaria's inflation in 2022 to 12.5% from 11.9% projected in May, citing higher energy and food prices and the indirect effects of energy price increases on businesses. Inflation is expected to abate to 6.8% in 2023, which is still higher than the 5% the EU executive projected in May.
On Wednesday, Bulgaria's central bank said real GDP growth is expected to slow down to 1.9% in 2022, while inflation is set to speed up to 14.7%.