Bulgaria: GDP growth clocks most downbeat reading since Q1 2021 in Q1 2022
May 17, 2022
According to a preliminary reading, GDP growth lost momentum, falling to 4.5% in the first quarter, from 5.2% in the fourth quarter of last year. Q1's reading marked the weakest reading since Q1 2021.
Looking at the advanced breakdown, total consumption expanded 6.6% (Q4: 7.5%) year on year, while fixed capital formation contracted 6.1% (Q4 2021: -15.2%). Both were likely affected by high-and-rising energy prices, lingering supply-chain disruptions and the worst Covid-19 wave to date in January–March.
In the external sector, exports weakened to 11.8% year on year (Q4 2021: 13.6%), while imports accelerated to 13.6% (Q4 2021: 11.2%).
On a seasonally-adjusted quarter-on-quarter basis, economic growth also decelerated, cooling to 1.0% in Q1, compared to the previous quarter's 1.4% expansion.
Looking ahead, year-on-year growth in Q2 is projected to further moderate to slightly above the pre-pandemic average. Persistently high inflation levels, increasing energy uncertainty—after Russia ceased gas deliveries to Bulgaria in April—and lingering supply chain disruptions will weigh on private spending and industrial activity. In addition, growing political disagreements among the ruling coalition may escalate in the near term, further destabilizing the country’s political and economic prospects.
On Bulgaria’s exposure to the war in Ukraine this year, analysts at EIU commented:
“The war in Ukraine will affect external demand for Bulgarian goods and services. Direct exposure to Russia is limited—in 2021 Russia accounted for 1.2% of goods exports. However, international tourism will take a hit—Russian visitors accounted for 7% of all tourists to Bulgaria in 2019 and 4.4% in 2021. The return of tourists from western Europe may also be subdued. However, Bulgaria exports some goods and commodities that are currently in high demand (mainly to Europe), such as electricity, grain, sunflower oil and Soviet-era weapons.”