Bulgaria Country Report - April, 2015

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Bulgaria Country Report - April, 2015

This report covers the key macroeconomic and financial releases for Bulgaria for the period from April 9, 2015 to May 8, 2015.

The European Commission revised up its projection for Bulgaria’s GDP growth in both 2015 and 2016, but the outlook remains gloomy amid an expected slowdown in public investment and continued weak private investment. The International Monetary Fund (IMF) said on April 14 it has lowered its forecast for the country’s 2015 GDP growth to 1.2% from 2% projected six months ago. The Bulgarian government has raised its 2015 economic growth projection to 1.4% from 0.8% expected previously.

Bulgaria's unemployment rate was 11% in March, unchanged from February, but 1.2pp lower in annual terms.

Bulgaria's overall business climate indicator rose by 2.5 points m/m in April, improving for the fourth consecutive month. Industrial production growth accelerated to 2.9% y/y in March from 2.5% y/y the month before. On the negative side, annual retail sales growth (at constant prices) decelerated to 0.8% in March from 4.2% in February.

Key points:
• Bulgaria’s consumer prices edged up 0.1% y/y in March, reversing a 0.5% y/y decline in February and posting their first annual growth in 20 months
• The consolidated budget showed a surplus of BGN257.1mn (€131.4mn) in Q1, reversing a deficit of BGN874mn in Q1 2014
• The current account deficit narrowed by 49.6% y/y to €239.7mn in January-February

Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
Bulgaria's long-term convergence interest rate drops to 2.36% in April 5
Bulgarian firms see shadow economy as top business obstacle - EBRD survey 5
REAL SECTOR 6
1. GDP 6
EU raises Bulgaria’s growth forecast, but outlook remains bleak 6
IMF slashes Bulgaria's 2015 GDP growth forecast to 1.2% 7
Bulgaria lifts 2015 GDP growth forecast to 1.4% 7
2. Inflation 8
Bulgaria’s consumer prices tick up 0.1% y/y in March after 19 months of deflation 8
Bulgaria’s annual PPI deflation softens to 0.4% in March 9
3. Industry and Trade 9
Bulgaria’s business climate improves further in April 9
Bulgaria’s industrial output growth quickens to 2.9% y/y in March 10
Bulgaria’s industrial companies plan to cut investments by 30% in 2015 10
Bulgaria’s construction output decline softens to 1.8% y/y in March 10
Bulgaria's building permits number falls 6.9% y/y in Q1 11
Bulgaria’s retail sales growth slows to 0.8% y/y in March 11
4. Labour Market 12
Bulgaria's unemployment rate stays at 11% in March - labour agency 12
5. Tourism 12
Foreign tourist arrivals to Bulgaria up 2.6% y/y in March 12
Bulgaria’s revenue from foreign visitors’ overnights grows 5.3% y/y in January-February 12
FISCAL SECTOR 13
Bulgaria posts budget surplus of 0.3% of GDP in Q1 13
Bulgaria’s 2014 budget deficit likely to turn higher than 2.8% of GDP after revision - Eurostat 13
Bulgaria’s end-March fiscal reserve widens 88% y/y 14
Bulgaria sells €25.6mn in 10-year T-bonds, yield drops 14
Bulgaria’s government debt rises 59% y/y to €12.24bn at end-March 14
FINANCIAL INTERMEDIATION 15
Bulgaria’s deposit interest rates decline in March, lending rates mostly drop 15
Bulgaria’s M3 up 1.9% y/y at end-March, domestic credit shrinks 11.9% y/y 16
EXTERNAL SECTOR 17
Bulgaria’s current account deficit halves y/y in January-February 17
FDI in Bulgaria drop 6.9% y/y in January-February 17
Bulgaria's foreign trade gap shrinks 34% y/y in January-February 18
Bulgaria’s gross external debt climbs 4.5% y/y at end-February 18
Bulgaria's FX reserves rise 2.7% m/m in April 19

Number of pages: 19
Release Date: Mon, 11 May 2015