Bulgaria Country Report - March, 2015

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Bulgaria Country Report - March, 2015

This report covers the key macroeconomic and financial releases for Bulgaria for the period from March 7, 2015 to April 8, 2015.

The International Monetary Fund (IMF) has lowered its forecast for Bulgaria's GDP growth in 2015 to 1.25% from 2% projected in October.

The unemployment rate edged down to 11% in February from 11.1% the month before, the state labour agency said. Bulgaria's unemployment rate dropped to 11.4% in 2014 from 12.9% in 2013, data from the statistics office's labour force survey showed.

There were two important events concerning external government debt. Firstly, on March 19 Bulgaria raised €3.1bn through three euro-denominated Eurobond issues, its largest ever debt sale. Secondly, on March 27 the Balkan country repaid in full a €1.5bn bridge loan received from HSBC, Societe Generale, Citibank, and Unicredit Bulbank.

Key points:
• The overall business climate indicator rose by 0.9 points m/m in March, improving for the third consecutive month, after rising by 3.8 points m/m in January and by 1.2 points m/m in February
• Bulgaria’s annual consumer price deflation softened to 0.5% in February from 1% the month before
• Strong growth in tax revenues helped Bulgaria post the smallest end-February budget deficit in the last five years
• Bulgaria’s current account deficit narrowed by 90% y/y to €43.8mn in January


Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
Bulgaria's long-term convergence interest rate drops to 2.49% in March 5
REAL SECTOR 5
1. GDP 5
IMF cuts Bulgaria's 2015 GDP growth forecast to 1.25%, warns of increased risks to outlook 5
2. Inflation 6
Bulgaria’s CPI deflation eases to 0.5% y/y in February 6
Bulgaria’s industrial PPI decline softens to 1.2% y/y in February 7
3. Industry and Trade 8
Bulgaria’s business climate improves further in March 8
Bulgaria’s industrial output growth quickens to 2.3% y/y in February 8
Bulgaria’s construction output drops 1.8% y/y in February 9
Bulgaria’s retail sales growth slows to 4.2% y/y in February 9
4. Labour Market 10
Bulgaria's unemployment rate falls to 11% in February - labour agency 10
Bulgaria’s unemployment rate drops to 11.4% in 2014 – labour force survey 10
Labour costs in Bulgaria up 3.1% y/y in Q4 11
5. Tourism 11
Foreign tourist arrivals to Bulgaria up 2.9% y/y in February 11
Bulgaria’s revenue from foreign visitors’ overnights rises 3.4% y/y in January 11
FISCAL SECTOR 12
Bulgaria’s end-February budget deficit narrows sharply on strong tax revenues 12
Bulgaria’s fiscal reserve up 31% y/y at end-February 12
Bulgaria raises €3.1bn through three Eurobond tranches 13
Bulgaria’s government debt rises 38.6% y/y to €10.65bn at end-February 13
FINANCIAL INTERMEDIATION 14
Bulgarian banking sector profit rises 31% in Jan-Feb 14
Bulgaria’s deposit interest rates fall in February, lending rates mixed 14
Bulgaria's M3 up 2% y/y at end-February, domestic credit shrinks 7.7% y/y 15
Bulgarian insurers' gross premiums rise 2.6% in 2014 15
EXTERNAL SECTOR 16
Bulgaria's current account deficit narrows 90% y/y in January 16
FDI in Bulgaria turn negative in January 16
Bulgaria's January foreign trade gap narrows 66% y/y 17
Bulgaria’s gross external debt rises 5.3% y/y at end-January 17
Bulgaria's FX reserves rise 10.4% m/m in March 18

Number of pages: 18
Release Date: Fri, 10 Apr 2015