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Bulgaria Country Report - July , 2016

Bulgaria Country Report - July , 2016 This report covers the key macroeconomic, financial and political releases for Bulgaria for the period since July 17, 2016.

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, a seasonally-adjusted statistics office flash estimate showed on August 12.

The asset quality review (AQR) and stress test of the banks in Bulgaria have shown that the country’s banking system is stable and no public support will be needed, central bank governor Dimitar Radev said in a statement on August 11. The commercial banks First Investment Bank (Fibank) and Investbank are expected to build up additional capital buffers, of BGN205.7mn (€105.2mn) and BGN33.3mn respectively, according to detailed results published on August 13.

Bulgaria's business confidence deteriorated in July. The industrial production increased by 3.9% y/y in June, reversing a 3.4% y/y decline in May. Bulgaria's construction output fell 13% y/y in June, after decreasing by 8.2% y/y the month before. Retail sales (at constant prices) increased by 5.4% y/y in June, accelerating from a 4% y/y rise in May.

Key points:
The CPI edged down 0.2% y/y in July, after dropping by 1.3% y/y in June
Bulgaria reported a consolidated budget surplus of BGN3.27bn in January-July, equal to around 3.7% of projected GDP, preliminary data from the finance ministry showed
The country reported a current account surplus of €693.8mn in the first half of 2016, reversing a deficit of €91.9mn in H1 2015

Bulgaria’s consumer confidence worsens in July 5
Bulgaria’s average per capita income rises 3% y/y in Q2 5
Bulgaria's long-term convergence interest rate drops to 2.39% in July 6
1. GDP 6
Bulgaria’s GDP growth slightly speeds to 3% y/y in Q2, flash estimate shows 6
2. Inflation 7
Bulgaria’s CPI deflation eases to 0.2% y/y in July 7
Bulgaria’s annual PPI deflation eases to 4.2% in June 8
3. Industry and Trade 9
Bulgaria’s business confidence worsens in July 9
Bulgaria’s industrial production rises 3.9% y/y in June 9
Bulgaria’s construction output decline deepens to 13% y/y in June 10
Bulgarian building permits, new construction data largely negative in Q2 11
Bulgaria's retail sales growth accelerates to 5.4% y/y in June 11
4. Labour Market 12
Bulgaria's unemployment rate drops to 8.2% in July, labour agency data show 12
Bulgaria’s unemployment rate drops to 8% in Q2, labour force survey shows 12
Bulgarian nominal gross wage growth slows to 7.8% y/y in June 13
5. Tourism 14
Bulgaria’s accommodation revenue rises 28.6% y/y in June 14
Foreign tourists in Bulgaria up 24.6% y/y in June 14
Bulgaria reports budget surplus of 3.7% of GDP in January-July 15
Bulgaria’s fiscal reserve rises 5.1% in June 15
Bulgaria’s government debt to GDP ratio rises 3.6pp q/q in Q1, highest gain in EU 16
Bulgaria’s central government debt edges down 0.2% m/m at end-June 16
Bulgaria’s fiscal council sees need for improving forecasts by finance ministry 17
Bulgarian PM supports reviving Belene nuclear power project with private investors 17
Bulgarian banking sector profit rises 54% y/y in H1 18
Two Bulgarian banks told to build up additional capital buffers 19
Bulgarian banking system is stable, stress test shows 19
Latvian 4finance completes acquisition of Bulgarian TBI Bank 20
Bulgaria’s M3 growth speeds up, contraction of non-government loans eases in June 21
Bulgaria’s deposit, lending interest rates mixed m/m in June 22
Bulgarian parliament elects deputy finance minister as new head of financial regulator 22
EIOPA to prepare methodology for stress tests of Bulgarian insurers 23
Bulgaria reports current account surplus of 1.5% of GDP in H1 24
FDI in Bulgaria drops 18.7% y/y in H1 25
Bulgaria’s foreign trade deficit narrows 55% y/y in H1 25
Bulgaria’s gross external debt drops 1.3% y/y at end-May 26
Bulgaria's foreign reserves rise 2.9% in July 27
Bulgarian Socialists pick former air force commander as presidential candidate 28
Frontex strengthens its activities in Bulgaria 29
Bulgarian parliament schedules presidential elections for November 6 29

Table 1 GDP, % y/y real (flash estimate) 7
Table 2 CPI, % y/y 8
Table 3 Domestic market PPI, % y/y 9
Table 4 Fiscal reserve, BGN mn 16
Table 5 Central government debt, € mn 17
Table 6 Money supply, domestic credit, loans 22
Table 7 Current account, € mn 24
Table 8 Foreign trade, FOB/FOB, BGN mn 26
Table 9 Gross external debt, € mn 27

Figure 1 Consumer confidence indicator 5
Figure 2 Long-term convergence interest rate 6
Figure 3 Bulgaria CPI, % y/y 8
Figure 4 Domestic market PPI, % y/y 9
Figure 5 Industrial output 10
Figure 6 Construction output 11
Figure 7 Retail sales 12
Figure 8 Unemployment rate 13
Figure 9 Fiscal reserve, BGN mn 16
Figure 10 Average interest rates on new euro loans 22
Figure 11 FDI in Bulgaria, € mn 25
Figure 12 Gross external debt, € mn 26
Figure 13 Foreign reserves 27

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