EBRD Improves Bulgaria Economic Growth Forecast

The European Bank for Reconstruction and Development has revised upwards its forecast for Bulgaria's economic growth in 2013 from 1.7% to 1.9%.

The bank cut its forecast for economic growth in October last year from 2.5% in the previous report published in May to 1.7%, citing slumping exports.

"Recovery is expected to continue to be modest in Bulgaria into 2012, due mainly to sluggish export demand. Growth in 2012 is likely to have ended up at around 1% only, with a modest forecast increase in 2013 to between 1 and 2%," EBRD latest Regional Economic Prospects report said.

EBRD praised Bulgaria's government for its fiscal performance, saying it remains very good, with only a very small deficit recorded in 2012.

"There was also a successful Eurobond issue in July 2012; the five-year EUR 950 M bond issue was heavily oversubscribed and achieved an impressively low coupon of 4.25%. As a result, Bulgaria has significant fiscal and monetary buffers to help the country withstand further shocks," EBRD report points out.

The EBRD said it now expects eight countries in central Europe and the Baltic States to experience average economic growth of 1.3% this year, having in October forecast an expansion of 1.7%.

It said the economies of eight countries in southeastern Europe that also have close trade and financial links to the euro zone will grow by 1.5% this year, a more modest cut to its October forecast, which was for an expansion of 1.6%.

The EBRD estimated that average growth in central Europe was 1.3% last year, while average growth in SEE was 0.1%.

The EBRD said it doesn't expect exports to the euro zone or support from euro-zone banks to improve any time soon, but at least neither drag on growth is likely to get much worse.

"While feeble demand...in the euro zone may not translate into further substantial decreases in exports, neither will it spur export growth," the EBRD said. "Similarly, thanks to calmer financial markets, cross-country deleveraging may..abate, but...countries...are unlikely to recover lost funding in the near future."

Earlier this month the World Bank revised downwards its forecasts for Bulgaria's economy, estimating it is to expand by 1.8% in 2013, down from its earlier forecast at 2.5%.

The country's budget has set it at 1.9%.

The latest version of the twice-yearly Global Economic Prospects report describes a "dramatic" easing of financial conditions around the world, stemming in part from policy changes to soothe the bond markets in Europe. Still, it warns that global growth will continue to be sluggish for years to come.

In the report, the World Bank estimates the world economy grew just 2.3% in 2012. It expects growth to pick up only modestly in the coming years, from 2.4% in 2013 to 3.3% in 2015.