Bulgaria: Gradual slowdown ahead

3 min
Manfred Stamer
Manfred Stamer Senior Economist for Emerging Europe and the Middle East

Flash estimates indicate that seasonally adjusted real GDP growth eased to +3% y/y in Q3 from +3.4% in Q2, taking the average of Q1-Q3 2018 to +3.3% y/y. The GDP breakdown reveals that strong domestic demand was again the sole growth driver in Q3, with final consumption rising by +6.9% y/y (unchanged from Q2) and fixed investment by +6.2% (+6.6% in Q2). Moreover, inventories added +1.9pp to Q3 growth (+1.3pp in Q2). The firm expansion in investment signals that Bulgaria is catching up with other Central European countries with regard to better absorption of EU funds. Meanwhile, external demand has continued to be a drag on growth in Q3. Exports contracted by -3.2% y/y (after -1.9% in Q2) while imports increased by a solid +5.1% y/y (+5% in Q2) so that net exports subtracted a hefty -5.4pp from Q3 growth (-4.5pp in Q2). Overall, we forecast full-year growth to moderate from +3.6% in 2017 to +3.2% in 2018 and +3% in 2019.