Bulgaria Country Report - Q2, 2017

August 7, 2017

This report covers the key economic, financial and political releases for Bulgaria for the period April 29 – August 1.

The new government of centre-right Citizens for European Development of Bulgaria (GERB), this time with the nationalist United Patriots coalition as a junior partner, took office on May 4.

Moody's, Fitch and S&P rate Bulgaria at Baa2, BBB- and BB+/B respectively. On May 26, Moody's affirmed the country’s rating. On June 2, Fitch and S&P affirmed Bulgaria’s ratings too, but also revised their outlooks to positive from stable.

On August 1, Macedonia and Bulgaria signed an historic friendship treaty that opens the way for deeper cooperation between the two neighbours.

Bulgaria’s real GDP increased 3.5% y/y in the first quarter of 2017, slightly accelerating from 3.4% y/y growth in Q4 2016, seasonally adjusted statistics office data showed on June 7.

In June, the World Bank projected that Bulgaria’s GDP will increase by a real 3% in 2017. In its spring European Economic Forecast, the European Commission (EC) has maintained unchanged its projections for the country’s GDP growth in 2017 and 2018 at 2.9% and 2.8% respectively. On May 10, the European Bank for Reconstruction and Development (EBRD) has raised its forecast for Bulgaria’s real GDP growth to 3.2% in 2017.

Bulgaria's consumer sentiment deteriorated during the three months to April, as the confidence indicator decreased to -27 from -25.4, the statistics office said on May 9. The January reading is the highest since July 2001. The overall business climate indicator decreased 1.4 points m/m in July, after falling 0.7 points m/m in June.

Bulgaria's industrial production increased 9.6% y/y in May, speeding up from a 5.1% y/y rise in April. The construction production went up 12% y/y in May, after climbing 2.1% y/y in April. Annual growth of retail sales (at constant prices) accelerated to 6.2% from 2.3%.

Key points:
• The CPI increased 1.9% y/y in June, after rising 2.3% y/y in May
• Bulgaria reported a consolidated budget surplus of BGN1.96bn (€1bn) in the first seven months of 2017, equal to 2% of projected GDP, preliminary data from the finance ministry showed
• The country reported a current account surplus of €79.1mn in the first five months of 2017, down from a surplus of €131.2mn in the same period of 2016

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