Bulgaria Country Report - February, 2015

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Bulgaria Country Report - February, 2015

This report covers the key macroeconomic and financial releases as well as the political events from Bulgaria for the period from February 5, 2015 to March 6, 2015.

Bulgaria’s GDP increased by a real 1.7% in 2014, accelerating from a 1.1% growth in 2013. In its Winter Forecast published on February 5, the EC said that Bulgaria's growth will decelerate to 0.8% this year.

Bulgaria's unemployment rate dropped by 2.4pp y/y to 10.6% in Q4. Also on the positive side, consumer sentiment improved in January as Bulgarians became less pessimistic about their financial situation and the general economic conditions in the next 12 months.

Bulgaria's parliament gave the green light to an €8bn Global Medium Term Note (GMTN) programme to be managed by Citigroup, HSBC, Societe Generale and Unicredit Bank. The new debt will be used for repaying maturing obligations and for financing the budget deficits in 2015-2017. A three-day Eurobond roadshow will be launched on March 16, Reuters reported.

Key points:

• The overall business climate indicator rose by 1.2 points m/m in February, improving for second consecutive month

• Consumer prices fell 1% y/y in January, after contracting by 0.9% y/y in December

• Bulgaria reported a small budget surplus of BGN69.1mn (€35.3mn) in January

• The current account surplus narrowed by 98% to only €18.8mn in 2014

• FDI in Bulgaria fell 7.3% to €1.18bn in 2014


Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
EC raises Bulgaria's 2015 growth forecast to 0.8% 5
EC moves to classify Bulgaria’s macroeconomic imbalances as excessive 5
Bulgaria's long-term convergence interest rate drops to 2.52% in February 6
Bulgaria’s average per capita income flat, expenditure up 3.1% y/y in Q4 – household survey 6
REAL SECTOR 7
1. GDP 7
Bulgaria’s GDP grows 1.7% in 2014 7
2. Inflation 7
Bulgaria’s CPI deflation deepens to 1% y/y in January on dropping fuel prices 7
Bulgaria’s industrial PPI drops 1.9% y/y in January 8
Bulgaria's agricultural producer prices fall 0.8% y/y in Q4 9
3. Industry and Trade 9
Bulgaria’s business climate improves further in February 9
Bulgarian consumer confidence improves in January 10
Bulgaria's industrial output growth slows to 0.9% y/y in December 10
Bulgaria's construction output up 2.3% y/y in December 10
Bulgaria's retail sales growth quickens to 6.4% y/y in December 11
4. Labour Market 11
Bulgaria's unemployment rate falls y/y to 11.1% in January - labour agency 11
Bulgaria’s unemployment rate drops to 10.6% in Q4 12
Bulgaria’s average gross monthly wage rises 2.2% y/y in December 12
Bulgaria’s labour productivity growth accelerates to 1.5% y/y in Q4 13
5. Tourism 13
Foreign tourist arrivals to Bulgaria up 6.9% y/y in January 13
Bulgaria's revenue from foreign tourist overnights up 8.6% in 2014 13
FISCAL SECTOR 14
Bulgaria reports €35mn budget surplus in January 14
Bulgaria’s fiscal reserve up 7.6% y/y at end-January 14
Bulgaria to hold Eurobond roadshow March 16-18 – report 15
Bulgaria’s public debt drops 5.9% m/m to €10.6bn at end-January 15
FINANCIAL INTERMEDIATION 15
Bulgarian banking sector assets recover to nearly flat y/y in January 15
Bulgaria’s deposit interest rates fall m/m in January, lending rates mixed 16
Bulgaria's M3 up 2% y/y at end-January, domestic credit shrinks 7.1% y/y 16
Fitch affirms Bulgarian Development Bank at BBB- with stable outlook 17
EXTERNAL SECTOR 18
Bulgaria's current account surplus melts away in 2014 18
FDI in Bulgaria drop 7.3% in 2014 18
Bulgaria's foreign trade gap widens 19.4% in 2014 19
Bulgaria’s gross external debt rises 7.1% in 2014 19
Bulgaria's FX reserves rise 9.8% m/m in February 20
POLITICS 20
Bulgarian PM Borissov nominates deputy PM Bachvarova for new interior minister 20

Number of pages: 20
Release Date: Mon, 09 Mar 2015