The European Bank for Reconstruction and Development (EBRD) has lowered its 2014 growth forecast for Bulgaria to 1.5%.

In May, the EBRD predicted a GDP growth rate of 1.9% for Bulgaria for 2014.

The EBRD has also predicted economic growth of 2% in 2015 for Bulgaria in its September 2014 report on the economic prospects in the Bank's countries of operations.

In the report, the EBRD said it has downgraded the forecast for Bulgaria for this year mainly due to the political instability and the banking sector turmoil in the country.

At the same time, the EBRD said it has taken into account the Bulgarian authorities’ rapid response to the banking turmoil, including the announcement of the country's intention to opt into the Single Supervisory Mechanism under Europe’s banking union project.

While Bulgaria’s recent banking sector stress may have impacted market confidence, the longer-term impact is likely to be contained, thanks to the authorities’ rapid response, the Bank opined.

Looking at the impact of the Russia-Ukraine crisis on the economies of Eastern Europe. the EBRD said that countries in the region "are expected to continue recovering at a moderate pace, with positive influences from the eurozone only partly offset by the weaker demand from Russia and the impact of a ban on some food exports to Russia."

Highlighting that since the May forecast the Russia-Ukraine crisis has intensified, the EBRD warned that the forecasts are subject to an exceptional degree of uncertainty and downside risks to the economic outlook are high.

"The single most important source of risk remains the further escalation of the crisis in Ukraine/Russia with a direct negative impact on the two countries and significant spill-over effects for the region as a whole," the Bank said.

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