The investments in the Bulgarian economy will be growing by an average of 6% to 8% year-on-year in the post-crisis period -UniCredit
2011-07-22 15:00:28
The investments in the Bulgarian economy will be growing by an average of 6% to 8% year-on-year in the post-crisis period according to an analysis of the economic team of UniCredit Bulbank. The investments are expected to continue to be the fastest growing component of Bulgaria's GDP as far as end consumption is concerned. Yet the growth rates will be cut almost in half compared with the unsustainably high annual rates of between 15% and 20% in the years of the domestic demand boom.
For Bulgaria, With regard to the individual consumption we expect average annual growth of about 3%-3.5% in real terms compared with an annual growth rate of between 6% and 7% in the period of the economic boom.
"After all, the recovery of the individual consumption and investments to their highest level from 2008 will take time“, said Kristofor Pavlov, Chief economist of UniCredit Bulbank. He points out that since in the first quarter of 2011 individual consumption in Bulgaria was about 8% lower than it was in the third quarter of 2008, the pre-crisis levels can be expected to be reached in the second half of 2013.
“One of the things that we can expect with a high degree of certainty is that the Bulgarian economy will face a tightened access to foreign savings in the post-crisis period", Kristofor Pavlov explained.
While in the period 2002-2008 foreign direct investments averaged over 17% of the GDP per an year, in the period after the crisis, they will stabilize at about 4 to 5% of the GDP, and only on the condition that the business environment in Bulgaria continues to improve at an accelerated pace, the economic team of UniCredit Bulbank believes.
Similarly, the inflow of foreign savings in Bulgaria is expected to go down from an average of 20% of the GDP annually in 2002-2008 to about 8%-10% of the GDP in 2013-2020. To make up for the reduced inflow of foreign savings, policies promoting national savings are needed.
“One opportunity that is worth considering is creating monetary stimuli paid for from public finances for the people saving in additional voluntary pension mechanisms, like the measures considered in Poland and the Czech Republic", Kristofor Pavlov believes. Besides, the better absorption of EU funds remains one of the major mechanisms to offset the effects of the decline of inflow of foreign savings.
The considerable progress in the absorption of EU money achieved in the past two years places the country in a favorable position for the negotiations of the EU financial framework for the next budget cycle. For this reason the economists of Unicredit BulBank are optimistic with regard to the chances of Bulgaria to bring to an end its EU funds absorption problems from its first post-accession years. source; American Chamber of Commerce, Bulgaria