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Bulgaria GDP Q1 2020

Bulgaria: Economy defies coronavirus crisis and continues growing in Q1

The economy grew 2.4% in year-on-year calendar-adjusted terms in the first quarter of this year, matching the preliminary estimate and slowing from the previous quarter’s 3.1% expansion. Meanwhile, on a quarter-on-quarter basis, growth in seasonally-adjusted terms slowed to 0.3% from 0.8% in Q4.

The slowdown reflected a sizable deceleration in total consumption (Q1: +4.1% year-on-year; Q4: +6.3% yoy), which took a hit at the tail end of the quarter due to the impact of lockdown on the unemployment rate, consumer confidence and wage growth in March, as reflected by plunging retail sales in the month. That said, the pace of expansion was still solid overall, likely supported by robust counter-cyclical government spending. Meanwhile, fixed investment weakened (Q1: +1.2% yoy; Q4: +3.0% yoy), dragged down by cooling business sentiment and shrinking industrial production amid forced closures and disrupted supply chains.

On the external front, exports rebounded (Q1: +1.9 yoy; Q4: -0.4%), as did imports, although to a lesser extent (Q1: +1.2% yoy s.a.; Q1: +1.2% yoy; Q4: -0.2% yoy).

The economy will shrink this year. Lockdown measures will deal a blow to the labor market and weigh on private consumption, while a sour European environment and disrupted global supply chains will suppress external demand and investment activity. Healthy fiscal and external metrics should mitigate the fallout, although potential coronavirus flare-ups pose downside risks.

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