Bulgaria: Economy maintains momentum in Q2
September 6, 2019
The economy grew 3.5% in annual and seasonally-adjusted terms in the second quarter of the year, above the preliminary estimate of 3.3% and matching the previous quarter’s print, according to comprehensive data released by the Bulgarian Statistical Institute on 6 September. Meanwhile, on a quarter-on-quarter basis, growth in seasonally-adjusted terms decelerated to a revised 0.8% (previously reported: +0.6% quarter-on-quarter), from 1.2% in Q1.
Domestic demand lost stride in Q2. Total consumption cooled again (Q2: +2.6% year-on-year seasonally-adjusted; Q1: +4.5% yoy s.a.), mainly due to household spending growth more than halving amid downbeat consumer confidence and despite a marked fall in the unemployment rate. Fixed investment also decelerated, albeit to a lesser extent, rising 2.2% year-on-year (Q1: +2.5% yoy s.a.).
The external sector’s contribution to growth strengthened, however, offsetting souring domestic demand. Exports of goods and services rose a healthy 3.7% year-on-year, limiting the damage of a more challenging global trading environment (Q1: +5.1% yoy s.a.). Meanwhile, imports contracted 2.0%, swinging from Q1’s robust 3.9% due to feeble domestic demand.
Growth should pick up this year compared to 2018, as a less negative contribution by net exports, especially from Turkey, will more than offset softening domestic demand. Private consumption growth is set to slow, but will remain solid thanks to a tight labor market and low interest rates, which will also sustain investment. A challenging external backdrop clouds the outlook.