Three Scenarios for the Мacroeconomic Consequences in Bulgaria of Fighting COVID-19

The Institute for Economic Research at the Bulgarian Academy of Sciences proposes three scenarios for the macroeconomic consequences in Bulgaria of fighting COVID-19, the Academy reported. The rapid analysis has been developed on the basis of information on the spread of the infection and the government measures taken, valid as of April 12, this year, with scientists updating their forecasts as new and significant changes occur.

The first scenario assumes that the peak of COVID-19 in Bulgaria occurs in mid-May, there is no second wave of diseases, the measures are gradually abolished and during the second half of the year the economy functions normally. The probability is that it will come true at 20%, with a GDP decline of 2.4% and a slight increase in inflation compared to 2019. season - a drop of up to 20 percent is projected.

The labor market will experience a moderately negative shock, with unemployment rising to 6.9%. Instead of a balanced budget, there will be a deficit of 1.5% of GDP, which will be covered by the issuance of new debt of BGN 2.5 billion.

The second scenario envisages a peak in late June - mid-July with gradual repeal of measures and possible reintroduction of some restrictions. The probability of it happening is 60%. Economists forecast a GDP decline of 4.3% and an acceleration of inflation to 4.2% on an annual basis. Foreign trade volumes will decline significantly and the current account deterioration will be more than EUR 1 billion, mainly due to a decrease in exports by 4.6% and a drop in the tourist season by about 50%.

The labor market will experience a negative shock, with unemployment doubling from 2019 to 10% of the workforce. Budget revenues will be lower than planned...