Prices will rise until 2023, but wages will outpace this growth

Income growth higher than inflation until the end of the year, the Bulgarian National Bank (BNB) predicts in its new forecast. The reason for this, according to Dimitar Radev’s experts, is the shortage of qualified workers, which will pressure the private sector to raise wages.

Income growth will accelerate by 14.3% in 2022, with a faster rate of rise relative to inflation expected to support real household disposable income, the document said.

This gap will close in 2023, for which the BNB expects wages to rise twice as slowly – by 6.5%, and for 2024 the increase will be slightly larger – up to 7.5%. Unemployment in our country is expected to reach 4.7% in 2022 and decrease to 4.3% in 2024.

However, the BNB lowered, and sharply, its forecast for the growth of the Bulgarian economy in 2022 – to 1.9% compared to the 2.1% expected in March. The arguments – slower GDP growth is determined by the expansion of the negative contribution of net exports, which will only be partially offset by the expected acceleration of domestic demand.

The central bankers’ expectations are much more pessimistic than they were three months ago for economic growth until 2024. For next year, they expect it to be no higher than 1.7% instead of the 3.9% they predicted in March. He looks a little more optimistic in 2024 – 3.7%.

Inflation will move in the opposite direction, BNB predicts, quoted by “24 hours” – by the end of the year it will accelerate to 14.7%, and not as expected in March – to 9.6%, the reason will be the increase in the price of all goods and services. It is only in 2023 and 2024 that inflation is expected to slow down to 3.8 and 3.1%, respectively, due to the expected calming down of the prices of energy raw materials on the international markets and the significant slowdown in food price increases.

A deficit of 1.1% of GDP in 2022, an increase to 1.3% in 2023 and a contraction to 0.5% in 2024 are also forecast by central bankers.

A slight slowdown in the growth of loans at the end of 2022 – to 8.4%, but preservation of the strong interest in mortgage loans despite the expectations of a rise in interest rates is already predicted by the BNB. The reasons – the significant acceleration of inflation and the remaining negative interest rates in real terms on housing loans together with the still negative level of interest rates on deposits.

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