Bulgaria Country Report - July , 2015

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Bulgaria Country Report - July , 2015

This report covers the key macroeconomic and financial releases for Bulgaria for the period from July 11, 2015 to August 12, 2015.

Bulgaria's consumer sentiment deteriorated slightly in July after reaching its best level in eight years in April. The business climate worsened for the second consecutive month in July.

The industrial production growth accelerated to 5.7% y/y in June from 3.9% y/y in May. The annual retail sales growth (at constant prices) speeded up to 2.7% in June from 0.8% the month before. Also on the positive side, the construction output increased 1.5% y/y in June, reversing a 7% y/y drop in May.

Bulgaria's parliament supported on July 29 the controversial deputy governor nominations of the central bank's recently appointed new governor Dimitar Radev. The Bulgarian National Bank (BNB) has invited bids for organising and coordinating a process of an asset quality review (AQR) and stress tests of the entire banking sector.

Key points:
• The CPI edged down 0.2% y/y in July, reversing a 0.4% y/y increase in June
• Bulgaria reported an estimated consolidated budget surplus of BGN801mn (€410mn), equal to 1% of the projected 2015 GDP, for January-July, the finance ministry said in a preliminary estimate
• The current account balance reported a surplus of €206.2mn in January-May, reversing a deficit of €472.9mn in the same period last year


Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
Bulgaria’s consumer confidence worsens slightly in July 5
REAL SECTOR 5
1. GDP 5
Bulgaria’s c-bank expects GDP growth to be largely sustained in H2 5
2. Inflation 6
Bulgaria returns to deflation in July 6
Bulgaria’s annual PPI deflation softens to 0.3% in June 7
Bulgaria's agricultural producer prices fall 6.7% y/y in Q2 7
3. Industry and Trade 8
Bulgaria’s business climate cools further in July 8
Bulgaria’s industrial output growth speeds to 5.7% y/y in June 8
Bulgaria’s construction output swings to growth in June after 5 months of declines 9
Bulgaria's building permits, construction starts rise y/y in Q2 9
Bulgaria’s retail sales growth spikes to 2.7% y/y in June 10
4. Labour Market 10
Bulgaria's unemployment rate falls to 9.4% in July – labour agency 10
Bulgarian real gross wage growth quickens to 7.8% y/y in June 11
5. Tourism 11
Bulgaria’s accommodation revenue drops 12% y/y in June 11
Foreign tourists to Bulgaria plunge 24% y/y in June as crises in Russia, Ukraine, Greece weigh 11
FISCAL SECTOR 12
Bulgaria posts budget surplus of 1% of GDP in January-July 12
Bulgaria’s end-June fiscal reserve widens 67% y/y 13
Bulgaria’s government debt to GDP ratio rises 10pp y/y in Q1, highest gain in EU 13
Bulgaria’s government debt climbs 51% y/y in June 14
FINANCIAL INTERMEDIATION 14
Bulgarian parliament backs controversial c-bank deputy governors nominations 14
Bulgaria’s c-bank invites bids for quality review of banking system's assets 15
Lower impairments drive Bulgarian banking sector profit up in H1 15
Bulgaria’s M3 growth speeds in June, domestic credit contraction moderates 15
Bulgaria’s deposit, lending interest rates mixed in June 16
Fitch affirms ratings of Bulgarian units of Greece’s NBG, Austria’s Raiffeisen 17
Bulgarian unit of Greece’s Eurobank to acquire local branch of Alpha Bank 17
EXTERNAL SECTOR 19
Bulgaria’s Jan-May current account swings into surplus on strong export growth 19
FDI in Bulgaria down 0.9% y/y in January-May 19
Bulgaria's H1 foreign trade gap shrinks 38% y/y on strong exports 20
Bulgaria’s gross external debt rises 2.6% y/y in May 20
Bulgaria's FX reserves rise 2.1% m/m in July 21

Number of pages: 21
Release Date: Thu, 13 Aug 2015