GKI: balance-worsening changes are about to start

This year’s economic growth is slower than last year’s 2.9-percent expansion, due to less funding from the EU and fewer government investments. Just like in the 1st quarter of the year, in the 2nd quarter of 2016 the level of investments dropped 8 percent. In the first 5 months of the year gross wages rose by 6 percent and real wages were up 7.5 percent. Retail sales expanded by 5 percent, while prices practically stayed put in the first half of 2016. These trends may entail a consumption growth above the 4-percent level of the 1st quarter.

Industrial output increased by 3 percent in the first 5 months, while at annual level plus 3.5 percent is expected. In the 2nd quarter of 2016 the unemployment rate dropped to 5.1 percent – a level 1.8 percentage points lower than a year before. However, in the last few months a balance-worsening change has started in the country’s economic policy: instead of reducing the budget deficit to 1.7 percent of the GDP, the 2017 budget contains an increase to 2.4 percent. According to the convergence programme, by the end of 2016 the GDP-proportionate budget deficit should reduce from 75.3 percent to 74.5 percent.