Bulgaria: Economy defies coronavirus crisis and continues growing in Q1
The economy grew 2.4% year-on-year in the first quarter, down from Q4 2019’s 3.1% outturn but beating market expectations that the economy would contract in Q1, according to a preliminary release by the Statistical Institute on 15 May.
A preliminary breakdown showed that 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 continued to fall (Q1: -5.3% yoy; Q4: -6.4% yoy), dragged down by cooling business sentiment and shrinking industrial production amid forced closures and disrupted supply chains. That said, exports rebounded (Q1: +1.1 yoy; Q4: -0.4%), while imports fell 0.6%, following a 0.2% dip in Q4, most likely due to weaker domestic demand and European supply-chain disruptions.
On a quarter-on-quarter, seasonally-adjusted basis, growth fell to a six-year low of 0.3%, from 0.8% in Q4.
More comprehensive data will be released on 4 June.
Commenting on the release, Valentin Tataru, economist at ING, stated:
“No matter how the detailed picture will look on 4 June, Bulgaria will probably be one of the very few European countries to show a GDP expansion in the first quarter of 2020 (up to date only Romania posted a quarterly expansion as well). […] Hence, although the second quarter will certainly look a lot worse, it is not all doom and gloom for the Bulgarian economy.”
The economy is seen shrinking this year due to the Covid-19 blow. Domestic demand is set to shrink amid sustained job shedding and falling investment activity, while the tourism sector will be smashed by the collapse in travel and foreign demand. The severity and duration of the pandemic and associated containment measures are the key downside risks to the outlook.