Bulgaria: GDP dives in Q2 as pandemic hits economic activity
September 4, 2020
The economy contracted 8.5% in calendar-adjusted year-on-year terms in the second quarter, slightly greater than the 8.2% drop reported in the preliminary estimate and contrasting the previous quarter’s 2.4% expansion. Q2’s result marked the worst reading on record, reflecting the impact of pandemic-related restrictions. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, economic activity dived 10.0% in Q2, swinging from Q1’s 0.3% increase.
The second quarter’s annual downturn was largely driven by a steep contraction in investment activity and external demand. Fixed investment slid 1.5% on an annual basis (Q1: +1.2% yoy), contracting for the first quarter in over three years as the state of emergency imposed in mid-March disrupted activity and increased uncertainty. Meanwhile, total consumption cooled in the quarter, growing a marginal 0.4% after having expanded 4.1% in Q1.
On the external front, exports of goods and services plummeted 19.0% on an annual basis in the second quarter (Q1: +1.9% yoy), dragged down by depressed foreign demand and a collapse in tourist arrivals due to the pandemic. Similarly, imports of goods and services plunged 19.1% in Q2 (Q1: +1.2% yoy).
The economy is expected to contract this year. Covid-19 containment measures will continue to subdue private consumption, while the bleak economic outlook for major trading partners will suppress external demand. Nonetheless, Bulgaria’s healthy fiscal metrics and increased EU funding should cushion the economic fallout, although a potential resurgence of coronavirus cases poses a downside risk.