Bulgaria Country Report - August, 2016

USD $475.00
Bulgaria Country Report - August, 2016

This report covers the key economic, financial and political releases for Bulgaria for the period August 20 – September 19.

Bulgaria’s real GDP growth accelerated to 3% y/y in the second quarter of 2016 from 2.9% y/y in the previous three months, according to seasonally-adjusted statistics office data that confirmed an August 12 flash estimate.

Following a visit to the country, an International Monetary Fund (IMF) mission expects economic growth of 3% in 2016, revising up an IMF forecast of 2.3% growth made in April.

Bulgaria's overall business climate indicator was approximately flat m/m in August, after dropping 0.9 points m/m in July. The industrial production increased by 2.3% y/y in July, decelerating from a 4% y/y rise in June. The construction output fell 11.8% y/y in July, after decreasing by 13% y/y the month before. Annual growth of retail sales (at constant prices) decelerated to 2.2% in July from 5.4% in June.


Key points:
• The CPI declined by 0.3% y/y in August, after edging down 0.2% y/y in July
• Bulgaria reported a consolidated budget surplus of BGN3.29bn (€1.68bn) in January-August, equal to around 3.7% of projected GDP, preliminary data from the finance ministry showed
• The country reported a current account surplus of €1.29bn in the first seven months of 2016, up from a surplus of €380.5mn in the same period of 2015


Table of Contents

1. EXECUTIVE SUMMARY 5
2. POLITICS 6
EC provides €108mn emergency funding to Bulgaria for border and migration management 6
Spat erupts over Bulgaria’s candidate for UN Secretary General 6
Bulgaria’s Reformist Bloc confirms Traykov as its presidential candidate 7
Bulgaria will not accept migrants from EU, PM Borissov says 8
US fighters to conduct joint air policing with Bulgarian planes on September 9-16 8
3. MACROECONOMIC OVERVIEW 9
IMF mission says Bulgarian economy shows short-term resilience, faces long-term challenges 9
Bulgaria’s business confidence unchanged m/m in August 11
4. REAL SECTOR 11
4.1 GDP, forecasts 11
Bulgaria’s GDP growth slightly speeds to 3% y/y in Q2 11
Bulgarian Chamber of Commerce and Industry projects 3% GDP growth in 2016 12
4.2 Inflation 13
4.2.1 Consumer price index 13
Bulgaria’s CPI deflation deepens to 0.3% y/y in August 13
4.2.2 Producer price index 14
Bulgaria’s annual PPI deflation eases to 3.8% in July 14
Bulgaria's agricultural producer prices drop 0.8% y/y in Q2 14
4.3 Industry and Trade 15
4.3.1 Industrial production 15
Bulgaria’s industrial production growth slows to 2.3% y/y in July 15
4.3.2 Construction volume 16
Bulgaria’s construction output decline softens to 11.8% y/y in July 16
4.4 Investment 16
Gross fixed capital formation edges down y/y in Q2 16
4.5 Labour and retail 17
4.5.1 Unemployment and wages 17
Bulgaria's unemployment rate drops to 8% in August, labour agency data show 17
Bulgaria’s labour productivity growth slows in Q2 17
Bulgaria’s labour cost growth decelerates to 7.3% y/y in Q2 17
4.5.2 Retail 18
Bulgaria's retail sales growth decelerates to 2.2% y/y in July 18
5. EXTERNAL SECTOR AND TRADE 19
5.1 Balance of payments and current account 19
Bulgaria’s current account surplus jumps 3.4 times y/y in January-July 19
5.2 Trade 19
Bulgaria’s foreign trade deficit narrows 48% y/y in January-July 19
5.3 Foreign direct investment (FDI) 20
FDI in Bulgaria drops 14.8% y/y in January-July 20
5.4 External debt 21
Bulgaria’s gross external debt drops 2% y/y at end-June 21
5.5 Foreign reserves 22
Bulgaria's foreign reserves rise 0.9% in August 22
6. PUBLIC SECTOR 22
6.1 Budget 22
Bulgaria reports budget surplus of 3.7% of GDP in January-August 22
Bulgaria’s fiscal reserve rises 2.6% in July 23
Bulgaria to lend to state-owned NEK for payment of Belene nuclear project debt 24
6.2 Government debt 25
Bulgaria’s central government debt edges up 0.1% m/m at end-July 25
7. FOREIGN EXCHANGE 25
Bulgarian lev depreciates 1.4% against US dollar over past month 25
8. FINANCIAL SECTOR AND CAPITAL MARKETS 26
8.1 Banking system 26
Bulgarian banking sector profit rises 48% y/y in January-July 26
Bulgaria’s M3 growth slows, non-government loans flat y/y in July 26
Bulgaria’s deposit interest rates mostly up m/m, lending rates mixed in July 27
Eight candidates interested in buying Bulgarian Corpbank subsidiary Bank Victoria 28
Bulgaria’s c-bank transposes EU legislation on fees related to payment accounts 29
Assets of Bulgarian resident investment funds rise 1.4% y/y at end-June 29
8.2 Interest rates and bond market 29
Bulgaria's long-term convergence interest rate drops to all-time low in August 29
8.3 Stock Market 30
Bulgarian bourse index SOFIX rises 2.2% in past month 30
8.4 Credit ratings 30
No rating actions on Bulgaria over past month 30
9. INDUSTRY AND SECTORS NEWS 31
Bulgaria’s accommodation revenue rises 18% y/y in July 31
Foreign tourists in Bulgaria up 20.6% y/y in July 31
Number of Bulgarian residents making tourist trips rises 10.3% y/y in Q2 31
Bulgaria seeks support from EU, Russia for €1.5bn natural gas hub 32
New car sales in Bulgaria rise 26.3% y/y in August 33
Bulgaria completes €52mn expansion of key Sofia ring road section 33
Bulgaria calls tender for 16.3 km section of Hemus motorway 34
10. MAJOR CORPORATE NEWS 34
S&P upgrades Bulgaria’s Vivacom to B+ from B- 34
Serbia postpones decision on extradition of Bulgarian tycoon Vassilev until 2017 35



Table 1 GDP, % y/y real, sa 12
Table 2 CPI, % y/y 13
Table 3 Domestic market PPI, % y/y 14
Table 4 Current account, € mn 19
Table 5 Foreign trade, FOB/FOB, BGN mn 20
Table 6 Gross external debt, € mn 22
Table 7 Consolidated budget, BGN mn 23
Table 8 Fiscal reserve, BGN mn 24
Table 9 Central government debt, € mn 25
Table 10 Money supply, domestic credit, loans 27

Figure 1 Bulgaria CPI, % y/y 13
Figure 2 Domestic market PPI, % y/y 14
Figure 3 Industrial output 16
Figure 4 Construction output 16
Figure 5 Retail sales 18
Figure 6 FDI in Bulgaria, € mn 21
Figure 7 Gross external debt, € mn 21
Figure 8 Foreign reserves 22
Figure 9 Fiscal reserve, BGN mn 24
Figure 10 Daily exchange rate, BGN per 1$ 25
Figure 11 Average interest rates on new euro loans 28
Figure 12 Long-term convergence interest rate 30
Figure 13 SOFIX 30

Number of pages: 36
Release Date: Wed, 21 Sep 2016