Bulgaria: GDP growth eases to three-year low in Q4
GDP growth waned to 1.6% year on year on a seasonally adjusted basis in the fourth quarter, from 1.8% in the third quarter. Q4’s reading marked the softest expansion in three years. On a seasonally adjusted quarter-on-quarter basis, economic growth inched up to 0.5% in Q4 (Q3: +0.4% s.a. qoq).
Preliminary data showed that the annual moderation was driven by softening domestic demand: Final consumption expanded by 3.1% in the quarter, moderating from Q3’s 4.2% rise, while fixed investment growth slowed to 4.2% (Q3: +9.7%). Meanwhile, headwinds to the external sector persisted at the end of 2023, with exports of goods and services shrinking 1.0% year on year in Q4 (Q3: -3.1% yoy). Imports of goods and services fell at a milder rate of 5.4%, from Q3’s 6.9% drop.
2024 should see GDP growth strengthen from last year’s moderation. Inflows of EU funds should boost investment. Additionally, recovering activity in the broader EU economy should bring forth a rebound in exports. Less positively, an elevated unemployment rate and still-tight monetary conditions in the Euro area will cap activity. Weaker-than-expected external demand, delayed absorption of EU funds and potential political instability pose downside risks.
Analysts at UniCredit commented on the outlook:
“Real GDP growth is likely to accelerate in 2024 on the back of improved absorption of EU funds, which will boost investment, and a tight labor market, which will help solid wage growth push private consumption. Euro adoption remains a key priority that will shape policymaking in the forecast period.”
Valentin Tataru, analyst at ING, said:
“2024 should be the year of public investments boom, as the country expects at least one (though more likely two) disbursements from the Recovery and Resilience Facility. […] All in all, we expect improvements in private consumption and government spending to accelerate GDP growth towards the pre-pandemic trend.”