Bulgaria has presented to EU its Convergence Program for the period 2021-2023 with important economic data for this period.
The document was adopted last week by the Council of Ministers, but has not yet been uploaded on the Finance Ministry's website.
It is only available on the European Commission's website. It is important to recall that the Convergence Program is a strategic document presenting the main elements of the national fiscal policy in the medium term.
According to the Convergence Program, the decline in investment will continue in 2021, but at a slower pace.
Private investment is the component that will recover most slowly from the crisis caused by COVID-19 due to the still uncertain economic environment. In 2021, GDP growth is projected to reach 2.7%.
Restrictive measures against the spread of COVID-19 will have a negative effect on household consumption in the first quarter of the year, after which it will increase, supported by increased employment.
In total for the current year consumption growth will be about 2%. As in 2020, government consumption will contribute to economic growth by nearly 1 percentage point. In 2021, exports of goods are expected to grow by 4.1% and almost reach pre-crisis levels.
The recovery of services will be smoother, predetermined by the much slower resumption of international travel.
The contribution of net exports to GDP growth will be positive (1.2 percentage points). GDP growth will accelerate to 3.6% in 2022, and in 2023 and 2024 economic growth will slow to 3.4 and 2.7%, respectively. Should be recalled that in the Convergence Program 2020-2023 forecasts were presented only for 2020. Expectations at that time were for a decline in real GDP by 3%.
In fact, GDP shrank by 4.2%.
According to estimates by the Ministry of Finance, potential GDP growth in 2020 was 1.7%, so the deviation from potential is negative at 3.1%.
The main reason for the weaker growth during the year was the negative contribution of the labor factor. The expected recovery in employment in the coming years will lead to accelerated growth of potential GDP and it will reach 2.3% in 2023.
The increase in investment will also lead to a more serious contribution of capital to growth in 2023. Total factor productivity (OFP) will contribute 1.2 - 1.3 percentage points for potential growth during the period considered. In 2024, a slight slowdown in growth to 2.2% is expected, which will come both in terms of capital and labor.
"The further increase of the employment will be limited by the negative demographic processes in the country", is written in the Convergence Program.