Bulgarian economy may contract more than 4% this year - IMF

FILE PHOTO: Workers spray disinfectant in Serdika metro station, following the outbreak of the coronavirus disease (COVID-19), Sofia, Bulgaria, April 8, 2020. REUTERS/Stoyan Nenov

SOFIA (Reuters) - The International Monetary Fund is likely to revise down its forecast for Bulgaria’s economic growth given the sharp rise of the coronavirus infections in the past weeks, the head of the IMF mission to Bulgaria said on Tuesday.

In October, the IMF forecast the small and open economy to contract by 4% in 2020 and saw its unemployment rate at 5.6%.

On Tuesday, the Balkan country of 7 million people reported 3,816 new coronavirus cases, bringing the total to 78,976, including 1,771 deaths.

“Given the rise in infections under the second wave, we are projecting the Bulgarian economy to contract a little more than we thought it would in the October forecast,” Jaewoo Lee told a virtual news conference upon concluding regular consultations with the Balkan country.

“However we do not expect unemployment to rise too sharply, mainly thanks to strong policy support,” Lee said.

Lee declined to make a specific estimate for the decline this year and said a new forecast would also depend on Bulgaria’s economic growth in the third quarter. Bulgaria is to publish its Q3 flash estimate data on Friday.

Lee said years of prudent fiscal policies had allowed Sofia to support the health system, people and firms and said the country should further boost spending by temporary and well-targeted measures if infections increased further.

Bulgaria is targeting a fiscal shortfall of 4.4% of economic output for 2020 and a fiscal gap of 3.9% of GDP in 2021. About 2.5% of GDP in both years are earmarked for anti-pandemic measures.

Reporting by Tsvetelia Tsolova; Editing by Alison Williams