Bulgaria Country Report - March, 2016

Bulgaria Country Report - March, 2016

This report covers the key macroeconomic, financial and political releases for Bulgaria for the period since March 15, 2016.

In its April World Economic Outlook (WEO), the International Monetary Fund (IMF) raised its forecast for Bulgaria’s 2016 real GDP growth to 2.3% from 1.9% projected in October. According to the World Bank’s Europe and Central Asia economic update, the country’s GDP growth is expected to slow down to 2.2% in 2016 from 3.0% last year.

Bulgaria's finance ministry has projected that economic growth will slow down to 2.1% in 2016 from 3.0% last year, but expects it to accelerate to 2.5% in 2017.

Bulgaria's business confidence strengthened m/m for a third consecutive month in March. The industrial production growth decelerated to 2.1% y/y in February from 2.2% y/y in January. The construction output went down 1.9% y/y in February, cooling from a revised 10.4% annual decline the previous month. Retail sales (at constant prices) increased by 3.1% y/y in February, speeding up from a 1.3% y/y rise in January.

Key points:
The CPI decreased by 1.5% y/y in March after dropping by 0.5% y/y in February
Bulgaria reported a consolidated budget surplus of BGN1.86bn (€949mn) in Q1, equal to some 2.1% of projected GDP, preliminary data from the finance ministry showed
The country reported a current account surplus of €165.5mn in January, reversing a deficit of €108.4mn in January 2015

Bulgaria's long-term convergence interest rate declines to 2.66% in March 5
1. GDP 5
IMF lifts Bulgaria’s 2016 GDP growth forecast to 2.3% 5
Bulgaria’s economic growth to slow to 2.2% in 2016, World Bank says 6
Bulgaria’s finmin expects 2016 economic growth to cool to 2.1% 6
2. Inflation 7
Bulgaria’s CPI deflation deepens to 1.5% y/y in March 7
Bulgaria’s annual PPI deflation deepens to 4% in February 8
3. Industry and Trade 9
Bulgaria’s business climate improves in March 9
Bulgaria’s industrial production growth slows to 2.1% y/y in February 9
Bulgaria's construction output drops 1.9% y/y in February 10
Bulgaria's retail sales growth accelerates to 3.1% y/y in February 10
4. Labour Market 11
Bulgaria's unemployment rate drops to 9.9% in March, labour agency says 11
Bulgaria’s labour cost growth slows to 5.8% y/y in Q4 11
5. Tourism 12
Bulgaria’s accommodation revenue rises 16.2% y/y in February 12
Foreign tourists in Bulgaria up 20.8% y/y in February 12
Bulgaria reports budget surplus of 2.1% of GDP in Q1 13
Bulgaria’s fiscal reserve drops 3.6% in February 14
Bulgaria’s government debt rises 8.9% y/y at end-February 15
Bulgaria’s cabinet approves project for acquisition of fighters, patrol ships 15
Bulgarian banking sector profit flat y/y in January-February 16
Bulgarian banking system's end-2015 capital adequacy at 22.18%, central bank says 16
Bulgarian parliament declassifies consultant’s report on bankrupt Corpbank 16
Corpbank majority owner sues Bulgaria with European court 17
EBRD, Bulgarian Deposit Insurance Fund sign €300mn loan agreement 18
Bulgaria’s M3 growth speeds, domestic credit contraction softens in February 19
Bulgaria’s deposit, lending interest rates mixed in February 19
Bulgaria’s current account turns to surplus in January 20
FDI in Bulgaria drops 86.1% y/y in January 21
Bulgaria reports foreign trade surplus of €42.4mn in January-February 21
Bulgaria’s gross external debt drops 12.9% y/y at end-January 22
Bulgaria's foreign reserves rise 8.2% in March 23
Bulgarian parliament adopts judiciary reform amendments in second reading 24

Table 1 World Bank forecast for Bulgaria 6
Table 2 CPI, % y/y 8
Table 3 Domestic market PPI, % y/y 9
Table 4 Bulgaria consolidated budget, BGN mn 14
Table 5 Fiscal reserve, BGN mn 14
Table 6 Government debt, € mn 15
Table 7 Money supply, domestic credit, loans 19
Table 8 Current account, € mn 21
Table 9 Foreign trade, FOB/FOB, BGN mn 22
Table 10 Gross external debt, €mn 23

Figure 1 Long-term convergence interest rate 5
Figure 2 Bulgaria CPI, % y/y 7
Figure 3 Domestic market PPI, % y/y 8
Figure 4 Industrial output 10
Figure 5 Construction output 10
Figure 6 Retail sales 11
Figure 7 Fiscal reserve, BGN mn 14
Figure 8 Average interest rates on new euro loans 20
Figure 9 FDI in Bulgaria, € mn 21
Figure 10 Foreign trade 22
Figure 11 Gross external debt, € mn 23
Figure 12 Foreign reserves

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