The economy contracted sharply amid two waves of COVID-19 infections, with the government providing sizable policy support. The outlook is very uncertain and the main challenge facing policymakers is to keep adjusting to changing circumstances. Over the medium term, structural reforms are needed that support inclusive income convergence toward advanced EU partners against demographic headwinds.
While unemployment rates in Europe declined after the global financial crisis until 2018/19, the incidence of long-term unemployment, the share of people who have been unemployed for more than one year to the total unemployed, remained high. Moreover, the COVID-19 pandemic could aggravate the long-term unemployment. This paper explores factors associated with long-term unemployment in European countries, using panel of 25 European countries over the period 2000–18. We find that skill mismatches, labor market matching efficiency, and labor market policies are associated with the incidence of long-term unemployment. Among different types of active labor market policies, training and start-up incentives are found to be effective in reducing long-term unemployment.
The labor share in Europe has been on a downward trend. This paper finds that the decline is concentrated in manufacture and among low- to mid-skilled workers. The shifting nature of employment away from full-time jobs and a rollback of employment protection, unemployment benefits and unemployment benefits have been the main contributors. Technology and globalization hurt sectors where jobs are routinizable but helped others that require specialized skills. High-skilled professionals gained labor share driven by productivity aided by flexible work environments, while low- and mid-skilled workers lost labor share owing to globalization and the erosion of labor market safety nets.
This 2017 Article IV Consultation highlights that the Bulgarian economy is performing well. Growth has been on an upward trend and is estimated to reach 3.8 percent in 2017 and 2018, driven by strong exports, easier financial conditions, and growing confidence. The current account remained in surplus in 2017, despite rapid wage growth. The economy shows signs of a closing output gap. Headline inflation turned positive in 2017 and inflationary pressure is rising. Fiscal outcomes have been stronger than budgeted in recent years, reflecting mainly revenue overperformance and under-execution of capital spending. The main challenge is to translate this recent recovery into sustained and inclusive growth and convergence with other European Union countries.
This 2017 Article IV Consultation highlights slower growth in the former Yugoslav Republic of Macedonia following a solid economic recovery since the global financial crisis. Growth slowed to 2.4 percent in 2016 and contracted by 0.9 percent in the first half of 2017. Economic activity has been supported by private consumption and exports, while negative effects from prolonged political instability have restrained investment and slowed down corporate credit growth. Inflation has gradually picked up, after staying negative during the past few years. Public debt is projected to rise to 47 percent of GDP in 2017. Currently, the government is in the process of preparing the draft economic program.
The Bulgarian economy has shown resilience since the last Article IV consultation. Growth over the last 4 quarters exceeded expectations. The authorities took concrete steps to correct the fiscal slippage in 2014 and efforts are underway to strengthen confidence in the health of the financial system. Looking ahead, risks to the outlook are broadly balanced. Downside risks stem mostly from weak external demand, possible regional tension, and reversal in domestic policy reforms.