The economists at UniCredit Bulbank have predicted an increase in economic growth in 2024 in their latest analysis from September 2023. This increase is the result of the expected slowdown in inflation and an increase in investments. In addition to the anticipated growth in GDP, there is also a slightly higher growth in real GDP projected for 2023, with an increase from 0.2% to 1.9% based on the more solid data recorded this year. In 2024, a further increase to 2.8% is expected, although this is a slight adjustment from their prediction of 3% at the end of June 2023.
A key role in accelerating real GDP growth in 2024 will be played by gross fixed capital formation. After three consecutive years of decline, gross fixed capital formation increased in real terms by 7.3% on an annual basis in the second quarter of 2023. With the maintenance of political stability, experts predict that real investment growth will accelerate to 10% annually for the entire 2024.
The private sector will also contribute to the acceleration of investments, albeit to a lesser extent. The shifting of geopolitical layers caused by the war in Ukraine will lead to changes in supply chains. The relocation of production will require the creation of additional production capacity in some sectors of the global economy. According to UniCredit Bulbank experts, this will have a positive effect for Bulgaria, as the country remains an attractive destination for investments. Further contributions to the acceleration of private investments will come from the large number of new residential construction projects initiated in recent years.
Inflation continues to decrease, with forecasts indicating a decrease to 5.9% by the end of the current year and 3.4% by the end of the following year. While the significant base effects caused by last year's increase in energy commodity prices are gradually dissipating, it is expected that the moderation of basic commodity prices and the improved functioning of global supply chains will lead to a reduction in inflationary pressure in the projected period.
Experts continue to forecast an increase in interest rates on leveraged mortgages at the end of the current year and the following year. So far, economists have decided to maintain the June 2023 predictions for an increase in average interest rates on new leveraged mortgages up to 2.7% in 2023, 3.5% in 2024, and 3.75% in 2025. Meanwhile, it is expected that interest rates on existing leveraged mortgages will increase by 30 to 40 basis points in 2024 and 2025, when economists predict that the era of extremely low mortgage interest rates will come to an end.
Source: Confindustria Bulgaria