According to reports from the EBRD and ILO released in January, the growth rate of Bulgaria's economy will accelerate to 1.8% in 2014 (up from estimated growth of 0.7% last year). However, unemployment will climb to 13.5% (up from 13.1% in 2013). The dynamics of the two estimates suggest that the long-expected recovery of Bulgaria's economy will be a jobless one.

The ILO expects the jobless rate to reach a ten-year high of 13.8% in 2015, after which it will begin to decline. Joblessness will fall to 12.7% in 2016 and further to 11.7% in 2017 and 11% in 2018. The organization also said that Bulgaria will have 2.8% labor productivity growth in 2014 (up from last year's 2%), accelerating to 3.6% in 2015. However, it will decline in 2016 and increase again in the following two years.

The unemployment dynamics the ILO predicts suggest that the expected growth in labor productivity in 2014 and 2015 will result from a decrease in workers' hours spent on production rather than from stronger fundamentals (a restructuring of the economy to a sustainable growth pattern and/or capital accumulation).

Key Points:

• Though the EBRD predicts higher external demand and slight improvement in domestic consumption to boost production, the ILO's employment outlook suggests that firms' eagerness to hire will not increase simultaneously.

• The political landscape continues to shift, with the center-right CEDB retaking the lead and ruling left-wing BSP dropping to second place according to a recent poll. This continues the trend of political uncertainty observed since last February.

• The EBRD projects that the average CPI inflation in Bulgaria will speed up to 1.4% in 2014 from an estimated 0.5% in 2013, when it was subdued by a series of cuts in utility prices. Cheaper food products also contributed to the lower inflation.

• The slow growth in the overall price level has raised concerns among analysts that domestic demand will remain a drag on the economy in the last quarter of 2013 and in early 2014.