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Bulgaria Country Report - October, 2016

  • November 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 40 pages

This report covers the key economic, financial and political releases for Bulgaria for the period October 20 - November 18.



On November 14, Prime Minister Boyko Borissov submitted to the parliament the resignation of the government he leads. The move came after the second round of the presidential election was won by the candidate supported by the opposition Bulgarian Socialist Party (BSP). The parliament accepted the cabinet's resignation on November 16.



Total has discovered oil in a Bulgarian Black Sea offshore block, the French energy company said in its third-quarter results report.



Bulgaria's real GDP growth decelerated to 3.5% y/y in the third quarter of 2016 from 3.6% y/y in the previous three months, a seasonally-adjusted statistics office flash estimate showed.



In its autumn European Economic Forecast, the European Commission (EC) revised upwards its projections for Bulgaria's GDP growth in 2016 and 2017 to 3.1% and 2.9% respectively. The European Bank for Reconstruction and Development (EBRD) has raised its forecasts of Bulgaria's real GDP growth to 2.8% in both 2016 and 2017, the institution said in its Regional Economic Prospects report on November 3.



Bulgaria's overall business climate indicator decreased 1.3 points m/m in October, after staying flat m/m in the previous two months. The industrial production increased 3.3% y/y in September, accelerating from a 2.6% y/y rise in August. The construction output decline steadied at 10% y/y in September. The annual growth of retail sales (at constant prices) slowed down to 2% from 5.3%.



Key points:

oThe CPI declined by 0.6% y/y in October, following a drop of the same size in September

oBulgaria reported a consolidated budget surplus of BGN3.41bn (EUR1.74bn) in January-October 2016, equal to around 3.8% of projected GDP, preliminary data from the finance ministry showed

oThe country reported a current account surplus of EUR2.13bn in the first nine months of 2016, up from a surplus of EUR954.6mn in the same period of 2015

Table Of Contents

Bulgaria Country Report - October, 2016
1.EXECUTIVE SUMMARY5

2.POLITICS6

Bulgaria's bribery rate 4th highest in EU, TI report shows6

Bulgarian PM Borissov tenders resignation of government, parliament accepts it6

Bulgarian showman appeals national referendum turnout count8

Bulgaria buys 10 jet engines for MiG-29 fighters for EUR21.8mn8

Bulgarian parliament adopts last-minute electoral code changes in final reading9

Bulgaria's interior minister raises danger level on border with Turkey over migrants9

3.MACROECONOMIC OVERVIEW10

"Resilient" Bulgarian economy to grow 3.3% in 2016, IMF says10

Bulgaria's business confidence worsens m/m in October11

Bulgaria drops to 39th position in WB's Doing Business 2017 ranking11

Bulgaria's consumer confidence slightly worsens in October12

Bulgaria's average per capita income rises 3.7% y/y in Q312

4.REAL SECTOR13

4.1 GDP, forecasts13

Bulgaria's GDP growth slightly slows to 3.5% y/y in Q3, flash estimate shows13

EC raises Bulgaria's 2016, 2017 GDP growth forecasts14

EBRD raises Bulgaria's 2016, 2017 GDP growth forecasts to 2.8%15

4.2 Inflation15

4.2.1 Consumer price index15

Bulgaria's CPI deflation steadies at 0.6% y/y in October15

4.2.2 Producer price index17

Bulgaria's annual PPI deflation eases to 2.4% in September17

4.3 Industry and Trade17

4.3.1 Industrial production17

Bulgaria's industrial production growth speeds up to 3.3% y/y in September17

4.3.2 Construction volume18

Bulgaria's construction output decline steadies at 10% y/y in September18

Bulgaria's building permits, new constructions data largely positive in Q319

4.4 Investment19

Gross fixed capital formation drops 4% y/y in Q3, flash estimate shows19

4.5 Labour and retail20

4.5.1 Unemployment and wages20

Bulgaria's unemployment rate edges up m/m to 7.9% in October, labour agency says20

Bulgaria's unemployment rate drops to 7% in Q3, labour force survey shows20

Bulgarian nominal gross wage growth speeds up to 7.8% y/y in September21

4.5.2 Retail21

Bulgaria's retail sales growth decelerates to 2% y/y in September21

5.EXTERNAL SECTOR AND TRADE22

5.1 Balance of payments and current account22

Bulgaria's current account surplus jumps 2.2 times y/y in January-September22

5.2 Trade23

Bulgaria's foreign trade deficit narrows 44% y/y in January-September23

5.3 Foreign direct investment (FDI)24

FDI in Bulgaria drops 21.1% y/y in January-September24

5.4 External debt25

Bulgaria's gross external debt rises 0.6% y/y at end-August25

5.5 Foreign reserves26

Bulgaria's foreign reserves drop 1.1% in October26

6.PUBLIC SECTOR26

6.1 Budget26

Bulgaria reports budget surplus of 3.8% of GDP in January-October26

Bulgarian parliament adopts 2017 budget bill in first reading27

Bulgaria's fiscal reserve drops 1.5% in September27

Bulgaria's NEK, Russia's Atomstroyexport agree on payment over cancelled Belene project28

6.2 Government debt29

Bulgaria's central government debt drops 0.9% m/m at end-September29

7.FOREIGN EXCHANGE29

Bulgarian lev depreciates 3.3% against US dollar over past month29

8.FINANCIAL SECTOR AND CAPITAL MARKETS30

8.1 Banking system30

Bulgarian banking sector profit rises 35% in January-September30

Bulgaria's M3 growth slows, non-government loans edge down y/y in September30

Bulgaria's deposit interest rates down, lending rates mixed m/m in September31

Two candidates shortlisted to bid for Bulgarian Corpbank subsidiary Bank Victoria32

Assets of Bulgarian resident investment funds rise 12% y/y at end-September33

8.2 Interest rates and bond market33

Bulgaria's long-term convergence interest rate drops to all-time low in October33

8.3 Stock Market34

Bulgarian bourse index SOFIX rises 4.9% in past month34

8.4 Credit ratings34

No rating actions on Bulgaria over past month34

9.INDUSTRY AND SECTORS NEWS35

France's Total finds oil in Bulgarian offshore block in Black Sea35

Romania and Bulgaria launch long delayed gas pipeline35

Bulgarian supplier Bulgargaz forecasts 10.2% increase in natural gas price in Q1 201736

Bulgaria's gross electricity production drops 12.6% y/y in January-August37

Bulgaria's accommodation revenue rises 28.8% y/y in September37

Foreign tourists in Bulgaria up 15.5% y/y in September37

New car sales in Bulgaria rise 9.4% y/y in October38

10.MAJOR CORPORATE NEWS38

Bulgaria again extends deadline of concession procedure for Sofia Airport38

Bulgarian electricity firm Energo-Pro Varna places EUR130mn bond39

EBRD agrees infrastructure development loan to CEZ Bulgaria39

Bulgarian Kalinel to open new production facility in Serbia's Bosilegrad40







Table 1 GDP, % y/y real (flash estimate)13

Table 2 EC autumn forecast15

Table 3 CPI, % y/y16

Table 4 Domestic market PPI, % y/y17

Table 5 Current account, EUR mn23

Table 6 Foreign trade, FOB/FOB, BGN mn24

Table 7 Gross external debt, EUR mn25

Table 8 Fiscal reserve, BGN mn28

Table 9 Central government debt, EUR mn29

Table 10 Money supply, domestic credit, loans31

Table 11 Electricity data, GWh37



Figure 1 Consumer confidence indicator12

Figure 2 GDP real growth, %14

Figure 3 Bulgaria CPI, % y/y16

Figure 4 Domestic market PPI, % y/y17

Figure 5 Industrial output18

Figure 6 Construction output19

Figure 7 Unemployment rate (labour force survey)21

Figure 8 Retail sales22

Figure 9 FDI in Bulgaria, EUR mn24

Figure 10 Gross external debt, EUR mn25

Figure 11 Foreign reserves26

Figure 12 Fiscal reserve, BGN mn28

Figure 13 Daily exchange rate, BGN per $129

Figure 14 Average interest rates on new euro loans32

Figure 15 Long-term convergence interest rate34

Figure 16 SOFIX34

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