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Bulgaria Country Report - September, 2016

  • October 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 39 pages

This report covers the key economic, financial and political releases for Bulgaria for the period September 19 – October 20.

The Bulgarian Academy of Sciences (BAS) has raised its GDP growth forecast for this year to 2.9% from the 1.9% expected in the spring. Earlier in October, in its autumn macroeconomic forecast the Bulgarian ministry of finance revised upwards its projection for 2016 real GDP growth to 2.6%, from 2.1% expected in the spring macroeconomic forecast. In the October edition of its World Economic Outlook (WEO), the International Monetary Fund (IMF) raised its projection for Bulgaria’s 2016 GDP growth to 3% from 2.3% forecast in April.

The statistics office now reports Bulgaria’s real GDP growth at 3.6% in 2015, up from 3% reported previously. GDP data for the first and second quarters of 2016 have been revised upwards as well, now indicating growth of 3.6% y/y and 3.5% y/y, respectively.

Bulgaria's overall business climate indicator was flat m/m for the second consecutive month in September. The industrial production increased by 2.6% y/y in August, accelerating from a 2.3% y/y rise in July. The construction output fell 10.2% y/y in August, after decreasing by 11.7% y/y in July. Annual growth of retail sales (at constant prices) accelerated to 5.4% in August from 2.3% July.



Key points:
- The CPI declined by 0.6% y/y in September, after dropping 0.3% y/y in August
- Bulgaria reported a consolidated budget surplus of BGN3.39bn (€1.73bn) in January-September 2016, equal to around 3.8% of projected GDP, preliminary data from the finance ministry showed
- The country reported a current account surplus of €1.91bn in the first eight months of 2016, up from a surplus of €805.5mn in the same period of 2015

Table Of Contents

Bulgaria Country Report - September, 2016
Table of Contents

1. EXECUTIVE SUMMARY 5
2. POLITICS 6
Bulgaria's opposition DPS officially backs presidential bid of former PM Oresharski 6
Bulgarian parliament committee approves last-minute electoral code changes 6
Presidential candidates of Bulgaria's GERB, BSP likely to go to runoff, survey shows 7
Bulgarian government to resign if GERB's presidential candidate does not win first round 7
Bulgaria's ruling GERB party leads in opinion poll 8
Bulgaria's ruling GERB party leads in opinion poll 9
3. MACROECONOMIC OVERVIEW 10
Bulgaria's Baa2 rating underpinned by strong fiscal position, resilient economy, Moody's says 10
Bulgaria's business confidence unchanged m/m in September 11
4. REAL SECTOR 11
4.1 GDP, forecasts 11
Bulgarian Academy of Sciences raises 2016 GDP growth forecast to 2.9% 11
Finance ministry raises Bulgaria's 2016 GDP growth forecast to 2.6% 12
IMF raises Bulgaria's 2016 GDP growth forecast to 3% 12
4.2 Inflation 13
4.2.1 Consumer price index 13
Bulgaria's CPI deflation deepens to 0.6% y/y in September 13
4.2.2 Producer price index 14
Bulgaria's annual PPI deflation eases to 2.7% in August 14
4.3 Industry and Trade 15
4.3.1 Industrial production 15
Bulgaria's industrial production growth speeds up to 2.6% y/y in August 15
4.3.2 Construction volume 16
Bulgaria's construction output decline softens to 10.2% y/y in August 16
4.4 Investment 16
Gross fixed capital formation edges down y/y in Q2 16
4.5 Labour and retail 17
4.5.1 Unemployment and wages 17
Bulgaria's unemployment rate drops to 7.8% in September 17
4.5.2 Retail 17
Bulgaria's retail sales growth accelerates to 5.4% y/y in August 17
5. EXTERNAL SECTOR AND TRADE 18
5.1 Balance of payments and current account 18
Bulgaria's current account surplus jumps 2.4 times y/y in January-August 18
5.2 Trade 19
Bulgaria's foreign trade deficit narrows 32% y/y in January-August 19
5.3 Foreign direct investment (FDI) 20
FDI in Bulgaria sinks 33.3% y/y through August 20
5.4 External debt 21
Bulgaria's gross external debt rises 0.5% y/y at end-July 21
5.5 Foreign reserves 22
Bulgaria's foreign reserves rise 0.8% in September 22
6. PUBLIC SECTOR 22
6.1 Budget 22
Bulgaria reports budget surplus of 3.8% of GDP in January-September 22
Bulgaria's fiscal reserve edges down in August 23
Bulgaria at risk of losing EU funds if it fails to meet certain conditions 24
Bulgaria's parliament approves loan to NEK to settle €629mn nuclear project debt in second reading 25
6.2 Government debt 25
Bulgaria's central government debt drops 0.1% m/m at end-August 25
7. FOREIGN EXCHANGE 26
Bulgarian lev depreciates 1.7% against US dollar over past month 26
8. FINANCIAL SECTOR AND CAPITAL MARKETS 27
8.1 Banking system 27
Bulgarian banking sector profit rises 46% y/y in January-August 27
Bulgaria's M3 growth speeds up, non-government loans edge up y/y in August 27
Bulgaria's deposit, lending interest rates mixed m/m in August 28
Fitch rates Bulgaria's UniCredit Bulbank BBB with negative outlook 29
EBRD lends €50mn to Raiffeisen Leasing Bulgaria to boost access to finance for SMEs 30
8.2 Interest rates and bond market 30
Bulgaria's long-term convergence interest rate drops to all-time low in September 30
8.3 Stock Market 31
Bulgarian bourse index SOFIX rises 6.2% in past month 31
8.4 Credit ratings 31
No rating actions on Bulgaria over past month 31
9. INDUSTRY AND SECTORS NEWS 32
Bulgaria's accommodation revenue rises 15.2% y/y in August 32
Foreign tourists in Bulgaria up 18.4% y/y in August 32
Bulgarian prosecutors indict three over €77mn damage from nuclear equipment deal 33
Bulgaria's gross electricity production drops 12.9% y/y in January-July 33
Bulgaria's antitrust regulator accuses 6 fuel retailers of forming cartel 34
Bulgarian regulator raises natural gas price by 2% in Q4 35
Four new companies interested in using Greece-Bulgaria natural gas interconnection 35
New car sales in Bulgaria rise 14.7% y/y in September 36
Bulgaria receives 8 bids for 16.3 km section of Hemus motorway 36
10. MAJOR CORPORATE NEWS 37
Bulgaria's Prista Oil Group buys back minority shares of EBRD, ADM Capital 37
Bulgarian coal miners end underground protest over delayed wages 37
Portugal's BA Vidro acquires Bulgarian glass container maker Drujba Glassworks 38
China's BAIC Automotive considers production of electrical buses in Bulgaria 38
Hamberger receives class A investment certificate for €15mn expansion in Bulgaria 38


List of Tables
Table 1 CPI, % y/y 14
Table 2 Domestic market PPI, % y/y 15
Table 3 Current account, € mn 19
Table 4 Foreign trade, FOB/FOB, BGN mn 20
Table 5 Gross external debt, € mn 21
Table 6 Consolidated budget, BGN mn 23
Table 7 Fiscal reserve, BGN mn 24
Table 8 Central government debt, € mn 26
Table 9 Money supply, domestic credit, loans 28
Table 10 Electricity data, GWh 34


List of Figures
Figure 1 Bulgaria CPI, % y/y 13
Figure 2 Domestic market PPI, % y/y 15
Figure 3 Industrial output 16
Figure 4 Construction output 16
Figure 5 Retail sales 18
Figure 6 FDI in Bulgaria, € mn 20
Figure 7 Gross external debt, € mn 21
Figure 8 Foreign reserves 22
Figure 9 Fiscal reserve, BGN mn 24
Figure 10 Daily exchange rate, BGN per 1$ 26
Figure 11 Average interest rates on new euro loans 29
Figure 12 Long-term convergence interest rate 31
Figure 13 SOFIX 31

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