Sofia, August 25 (BTA) - In line with the international environment and developments in Bulgaria's main trading partners, external demand for Bulgarian goods and services is expected to post significant year-on-year growth in the third and fourth quarters of 2021, according to an economic review posted on the website of the Bulgarian National Bank (BNB) on Wednesday. The 2020 low base effects contribute essentially to this dynamics.

The forecast is based on the assumption that the containment measures imposed in Bulgaria and other EU Member States will be phased out in the second half of 2021.

The economic review employs statistical data published up to July 14.

In the first four months of 2021, the total current and capital account surplus of Bulgaria decreased from the same period of 2020, reflecting mainly a higher deficit on the trade balance and decreased net revenue from travel and transport services, the BNB said. In the second half of 2021, the positive current and capital account balance is expected to increase on an annual basis from the end of 2020, driven mainly by a projected rise in net revenue from travel and transport services under an assumption of a phase-out of COVID-19 containment measures.

Over the first five months of 2021, the annual growth of non-government sector's deposits accelerated from the end of 2020 under the influence of still deferred household consumption of some goods and services, limited investment activity of corporations and maintenance of precautionary savings amid a persistent uncertainty surrounding the COVID-19 pandemic development. Since March, the growth rate of credit to the private sector has gradually accelerated, which was more pronounced in the sector of households.

In the second half of the year, the increase in deposits of the non-government sector is expected to slow down slightly in line with a projected gradual rise in economic activity and private consumption. The projected domestic demand growth, still low lending rates and positive housing market prospects will favour the growth of credit to the private sector over the projection horizon.

In the first quarter of 2021, the real GDP growth rate in Bulgaria accelerated to 2.5 per cent on a quarterly basis. Net exports and private consumption contributed most strongly to economic growth over the review period. The positive contribution of net exports was driven by the services trade, where exports of services posted growth, and imports of services reported a fall, while private consumption growth was in line with increased real income of households, reflecting higher wages and net government transfers, said the BNB.

In June 2021, the annual inflation slightly accelerated compared to the end of 2020, reaching 2.4 per cent. This reflected mainly the higher prices of energy products due to the strong hike of international oil prices on an annual basis. Core inflation also accelerated from the end of the previous year amid easing of containment measures against COVID-19 and growth in the final consumption expenditure of households. Concurrently, inflation in the food group slowed down somewhat from end-2020. Administratively controlled prices continued to contribute positively to overall inflation driven by indirect effects of higher international natural gas prices.

In the third and fourth quarters of 2021, the BNB expects the gradual acceleration of inflation to be sustained, reflecting mostly the assumptions of upward developments in international food and petroleum product prices over this period compared with end-2020. LN/DD