EC: Inflation in Bulgaria will reach 12.5%

Inflation in Bulgaria will accelerate to 12.5% in 2022 due to higher energy and food prices and the indirect impact of higher energy prices for businesses on headline inflation. This is what the European Commission predicts for Bulgaria in its summer forecast.

In 2023, inflation is expected to settle at a level of 6.8%. High food and service prices will keep overall inflation relatively high, reflecting the expected development of food futures and the impact of previous wage increases, respectively.

In the first quarter of 2022, GDP grew by 0.8% on a quarterly basis, with all components of demand contributing to growth. Private consumption growth was supported by favorable labor market conditions and a sharp increase in wages in the private sector at the beginning of the year. Consumer confidence has worsened since March 2022, suggesting lower growth in private consumption for the rest of the year. Exports of goods and services are forecast to expand in 2022, driven by both goods exports and tourism. The implementation of the Recovery and Resilience Plan will be the main factor behind the accelerated investment growth in both 2022 and 2023.

Overall, real GDP is expected to grow by 2.8% in 2022 and by 2.3% in 2023. Compared to the spring forecast, the growth rate of real GDP is 0.7 pp. higher in 2022 and by 0.8 pp. lower in 2023. The upward revision in 2022 mainly reflects the strong recovery in the first quarter of this year. A weaker external environment and tighter credit conditions combined with weaker real wage growth explain the downward revision for 2023. Strong wage growth in 2022 will lead to further price appreciation, especially in the non-tradable sector. In the context of weaker credit activity and adjusted inflation expectations...