GDP growth ticks up slightly in Q1 2024

According to a second release, GDP growth gathered pace to 1.8% year on year in the first quarter of 2024 from 1.7% in the fourth quarter of last year. Q1's reading marked the best result since Q2 2023 and exceeded the preliminary estimate of a 1.7% rise. On a seasonally adjusted quarter-on-quarter basis, economic growth slowed to 0.4% in Q1 from the previous quarter's 0.5% growth.

The improvement was fueled by domestic demand. Private consumption increased 3.9% in the first quarter (Q4 2023: +3.4% yoy), supported by the lowest average inflation in nearly three years and accelerating wage growth. Moreover, growth in public consumption improved to 1.4% in Q1 (Q4 2023: +0.6% yoy). In addition, fixed investment growth accelerated to 7.9% in Q1 (Q4 2023: +4.7% yoy). On the external front, exports of goods and services declined 2.1% year on year in Q1, unchanged from the previous quarter. Meanwhile, imports of goods and services dropped at a softer rate of 3.7% in Q1 (Q4 2023: -4.5% yoy), marking the best reading since Q1 2023.

Looking ahead, GDP growth is set to gradually accelerate during the remainder of 2024, bringing full-year growth comfortably above 2023’s rate. Investment and public spending will remain the key engines of growth, while exports are expected to stage a recovery later in the year. Renewed political instability and sticky inflation are downside risks, while stronger-than-expected EU demand is an upside risk.

EIU analysts commented on the outlook: “We continue to forecast Bulgarian growth of 2.2% in 2024 and 2.4% in 2025. We may revise up our headline growth forecasts for 2024-25 depending on the policy priorities of the next government. We expect a new centre-right Citizens for European Development of Bulgaria (GERB)-led coalition to be formed, but there is still a risk that coalition negotiations will fail and another snap election be called.” UniCredit analyst Kristofor Pavlov said: “We now expect stronger private consumption growth this year, on the back of a more pronounced acceleration of real wage growth and household credit growth than we anticipated three months ago. The latter would be offset by a weaker positive contribution to growth from investment. We think political uncertainty will weigh on private sector investment and will delay the implementation of structural measures needed to push through the absorption of EU funds from the country’s RRP.”

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