Bulgaria Government Consumption (ann. var. %)

Government Consumption in Bulgaria

Economic growth records slowest increase since Q4 2020 in Q1

According to a preliminary reading, GDP growth eased to 2.0% year on year in the first quarter, from 2.1% in Q4 2022. Q1’s reading marked the slowest expansion since Q4 2020. Ahead of a comprehensive release, the preliminary release pointed to declining private spending growth—amid deeply entrenched consumer pessimism, elevated inflation and tighter financial conditions—and weaker exports growth as the drivers behind the moderation. In contrast, fixed investment improved from the previous quarter, preventing a larger slowdown.

Meanwhile, on a seasonally adjusted quarter-on-quarter basis, economic growth slowed to 0.4% in Q1, following the previous period’s 0.5% expansion. Q1’s reading was the worst since Q1 2022.

A detailed breakdown will be released on 8 June.

Looking ahead, private spending will likely continue to drag on GDP growth this year, as stagnating wage growth and higher interest rates chip away at household budgets. Deteriorating exports growth owing to an EU-wide slowdown—it accounts for two-thirds of Bulgaria’s trade volume—will also cap economic activity. More positively, a rebound in investment supported by EU funds should aid growth.

Overall, risks remain skewed to the downside, with the ongoing political crisis, the potential for the war in Ukraine to escalate and potential delays to the disbursement of EU funds clouding the outlook.