In its latest report - Interim Forecast February 2012 the European Commission revised down its estimate for Bulgaria’s 2011 economic growth to 1.8% from 2.2% previously. In 2012, the economy is expected to register 1.4% GDP growth, down from 2.3% in the Commission’s autumn report. HICP inflation slowed considerably over the course of 2011 and amounted to 3.4% in 2011 on average, 0.3 p.p. less than expected in the autumn forecast. Inflation is expected to moderate to 3% on average in 2012, supporting growth in real purchasing power of consumers. Following the rapid rebound in exports over the past two years, domestic demand is expected to pick up with a lag and become a main driver of growth in 2012, especially since domestic economic fundamentals have improved amid the rapid adjustment process. Private-sector imbalances have unwound very quickly, as indicated by the current account swinging into a surplus, while the ratio of private sector debt to GDP has started to decline and the dependency of the financial sector on external financing is decreasing. In spite of vulnerabilities, the financial sector has remained stable and has provided for modest growth in private sector credit in 2011. Economy also benefits from relatively strong public finances, which do not face major adjustment needs in the longer term. Investment is expected to be upheld by public sector projects. After a notably slow start in EU structural funds intake over the previous years, it is planned to increase absorption significantly in 2012. However, this is countered by weak private investment activity, given the relatively high debt stock of the corporate sector, which entails further deleveraging of corporate balance sheets