The International Monetary Fund (IMF) has projected a modest pick-up of Bulgaria's economic growth in 2014 from a subdued rate last year, Finance Ministry of the Balkan country said Friday.

The forecast was made after IMF mission in Sofia from June 6 to 11 discussed the economic outlook and government policies with the Bulgarian authorities, the ministry said in a press release, quoting a statement of Michele Shannon, IMF Mission Chief for Bulgaria.

According to Shannon, the economic growth in 2014 would be driven by firming domestic demand and higher absorption of European Union (EU) funds.

"The 2014 deficit target has been appropriately maintained at 1.8 percent of GDP, which keeps the deficit within the legal limit and supports policy credibility," Shannon said.

Low public sector debt and limited exposure to capital markets have continued to insulate Bulgaria from international market volatility, she said.

According to Shannon, while unemployment is projected to remain high, employment has begun to rise.

Consumer prices have been declining due to falling import prices, base effects from reductions in administered prices last year, and remaining slack in the economy, she said.

However, the effects of domestic political uncertainty on reform momentum and investment, as well as lingering uncertainty in the outlook for key euro area trading partners, remain key risks to the outlook, Shannon said.

Recent developments in Ukraine and Russia are projected to have modest growth effects through trade and investment channels, while dependence on Russian gas imports represents a potential risk, she said.

"The timing of implementation of the South Stream gas pipeline project remains uncertain, and potential economic and employment effects are excluded from current projections," she said.

In addition, risks to budgeted government revenues this year remain significant, particularly in light of deflation, and at the same time, expenditure pressures are strong, Shannon said.

Global Times