Unemployment in Bulgaria projected to increase, investments drop

According to the European Commission's spring economic forecast for Bulgaria, the Bulgarian economy is projected to shrink by 7.2% this year because of the coronavirus.

The state of emergency in Bulgaria was declared on 13 March 2020. The sectors most severely affected are retail trade, transport, hotels and restaurants, arts and entertainment.

According to Brussels, the positive economic trends in the Bulgarian economy prior to the outbreak of the pandemic should help it recover from the major economic shock caused by COVID-19.

EC notes that unemployment is rising, despite the state's efforts to support the labour market. Unemployment rate is projected to jump to 7% this year, with job losses mostly in the sector of services. The forecast rate of unemployment for 2021 is 5.8%.

Consumption is forecast to fall by 6% in 2020. Investments are expected to decline by 18% this year due to current and expected financial difficulties and significant reductions in cash flows.

Exports are expected to fall by more than 13% in 2020, mainly due to the global impact of the pandemic. Imports are expected to shrink by more than 12%, mainly due to the large decline in investment, but also due to the decline in exports.

Bulgaria's growth is expected to recover to around 6% in 2021, which will partially offset the decline in 2020. An improvement in the labour market is also expected.

Bulgaria had a strong fiscal position when the pandemic started, the European Commission commented and recalled that last year's budget surplus reached 2.1%.

Due to the difficult macroeconomic situation, which will increase the cost for unemployment and social benefits and reduce tax revenues, Bulgaria will report a budget deficit of 2.8% this year and 1.8% next year.