This report covers the key macroeconomic and financial releases as well as the political events from Bulgaria for the period of September, 5 2014 - October 7, 2014.

A record high number of 8 parties will enter Bulgaria's next parliament, promising tough negotiations on the formation of a government that will be faced with important budget and banking sector decisions. The election results are likely to prolong the political uncertainty that has been haunting Bulgaria since early 2013.

The IMF lowered its outlook for Bulgaria's economic growth this year and in 2015 to 1.4% and 2%, respectively, according to the October edition of its World Economic Outlook (WEO). Bulgaria's GDP growth was previously forecast to quicken to 1.6% in 2014 from 0.9% last year and accelerate further to 2.5% in 2015. In addition, the EBRD revised down its own 2014 growth projection for Bulgaria to 1.5% (equal to that of the government) from a previous forecast of an 1.9% expansion.

Meanwhile, consumer price deflation eased to a one-year low of 0.6% y/y in August 2014 as the effects from the regulated electricity price cuts faded almost entirely. On the other hand, coming on top of poor industrial output data, business confidence in Bulgaria's economy fell for the fourth consecutive month in September, reaching a 9-month low of 16.1 points, as the assessment of the present business situation of industry, construction and retail managers worsened considerably. On the positive side, the registered unemployment rate fell to 10.4% in August 2014 from 10.6% in July and 10.7% a year earlier.

Key points:
• Jan-Aug general government deficit reaches 88% of full-year target
• Public debt grows to 23% of GDP at end-August
• Banking sector net profit falls 67% y/y in Jan-Aug on Corpbank's deteriorating loan quality
• Bank deposits up 6.9% y/y to EUR 34.9bn at end-August
• FDI in Bulgaria drops 23% y/y to EUR 825.3mn in Jan-July 2014