Bulgaria's economic growth slowed to 1.1% y/y in the first quarter of 2014 from 1.2% in the final quarter of 2013 due to falling agricultural output, according to a flash estimate by the statistics office. In Q1, growth was driven by industry on the production side and domestic consumption on the demand side. Compared to the previous quarter, the GDP rose 0.2% in seasonally-adjusted terms.
Industry grew 3.4% y/y in Q1, accelerating from a 2.3% y/y increase in Q4 2013, supported by booming car manufacturing (at the Litex-Motors car plant) and the expanding capacities of local car part makers. On the other hand, agricultural output shrank 0.4% y/y, reversing a 2.1% y/y rise in the preceding quarter. The growth pace of the services sector slowed down slightly to 1.2% y/y from 1.4% y/y.
On the demand side, private consumption rose for the first time in five quarters, confirming the government's expectations for higher household spending. It grew 2% y/y in Q1, reversing a 0.6% y/y drop in the previous quarter. The latest employment data supports an optimistic view on the likelihood that a recovery in domestic demand could be taking place. The number of people with a job increased by 1.4% y/y in Q1 and the unemployment rate fell by 0.8pps y/y to 13%.
Public consumption rose 1.5% y/y in Q1, slowing from a 1.6% y/y rise in Q4 2013, while the value of purchases that contribute to gross capital formation climbed 3.2% y/y, quickening from a 3.0% increase.
Meanwhile, exports advanced only 0.7% y/y in Q1, posing a downside risk to the government's GDP growth forecast of 2.1% for full-2014. Exports are seen as one of the main drivers of Bulgaria's economy this year not only by the cabinet of PM Plamen Oresharski but also by the European Commission. The EC expects the economy to expand by 1.7% in 2014.
A detailed breakdown of the first-quarter GDP will be released on June 4.
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