Bulgaria's economy expanded 0.2% y/y in the second quarter of 2013, slowing down from 0.4% growth in Q1, the statistics office reported. The data confirmed the flash estimate released in mid-August. In quarterly terms, the seasonally-adjusted GDP contracted 0.1%, also matching the first estimate.
The country's GDP growth was held back by consumption, which contracted 1.3% y/y in Q2. Household consumption, which was the main growth driver in 2012, fell 1.3% y/y. The subdued propensity to consume was confirmed by the growing household deposits (up 9% y/y as of end-June). In addition, no major improvement in employment had taken place over the period to support aggregate demand. While the latest labour force data showed that some 26,000 more persons found jobs in the second quarter of 2012 as compared to a year earlier, the number accounted for only 0.9% of total employment. The decline in private consumption was only partly offset by a 2.6% annual increase in government spending.
Expectations of lower-than-expected domestic demand triggered a downgrade of the 2013 GDP growth projection to 1% (down from 1.9%), adopted by the caretaker government in April. Earlier this week, Petar Chobanov - finance minister in the cabinet of PM Plamen Oresharski, which took power at end-May after snap elections, said that the government plans to cut the economic growth forecast further to 0.6%-0.8%. He stressed that demand is not likely to pick pace this year but may recover in 2014.
Meanwhile, according to the latest GDP data, gross capital formation rose 1.4% y/y in Q2 (revised down from a previous estimate of 1.8% growth). Exports grew 4.5% y/y (up from a previous 2.2% y/y) and imports added 2% y/y (up from a previous 1.1% y/y).
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