Raiffeisenbank has cut its outlook on Bulgaria expecting its economy to rise by a modest 2.5 per cent next year against its earlier estimate of four per cent.

This is the second downward revision of Bulgaria's gross domestic product (GDP) growth by a local bank after UniCredit Bulbank earlier in August lowered its forecast for the current year to 2.5 per cent from 2.8 per cent.

The local arm of Austrian Raiffeisen Bank International estimates that next year the Bulgarian economy will follow the dynamics of 2011 with consumption adding a little more than one per cent and investments gaining 3.5 per cent, while exports slowing down to 3.6 per cent year-on-year.

The Bulgarian labour market is unlikely to pick up in 2012, according to the bank's forecast, which sees unemployment at about 11 per cent.

The grimmer outlook factors in expectations of lower consumer demand in Germany and other countries with which Bulgaria trades actively, resulting in deceleration of Bulgarian exports and weaker money inflows, including foreign direct investments.

The revised forecast also takes into account the current financial markets jolts and downbeat data on major global economies, which caused a recent downgrade on the euro zone growth forecast to 1.1 per cent from 1.7 per cent by Raiffeisen Bank International.

According to Raiffeisenbank Bulgaria's chief economist Kaloyan Ganev, the economic pressure will be felt in Bulgaria with a lag of three or more months as local companies will continue to fulfill contracts signed by the middle of this year. Therefore, the GDP growth rate for 2011 remains unchanged at 2.5 per cent.