Bulgaria GDP Q2 2021
(Source: Trading Economics- National Statistical Institute)

Bulgaria exits recession with 9.6% GDP growth in Q2 2021

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Bulgaria’s economic output rebounded by 9.6% from a year earlier in the second quarter of 2021, the most since the first quarter of 1998, after a 1.8% contraction in the previous period,, flash data from National Statistical Institute (NSI) showed.

It was the first growth in four quarters due to the low base effect from the Covid-19 shock last year and as the economy gradually recovers, exiting recession. The lifting of Covid-19-related restrictions in April – June, increased wages in the public sector and the improving situation of the labour market all helped the economy rebound.

Final consumption (6.7% vs 3.1% in Q1) and gross fixed capital formation (4.2% vs 1.0%) grew faster.
Of note, private consumption did not decline even in the crisis year of 2020, largely because of relatively milder containment measures and robust wage growth throughout the year.
Meanwhile, exports of goods and services rose 20.3% in the second quarter of 2021 ( vs -5.9% in Q1) and imports climbed 28.6% (vs 1.9%).

On a quarterly basis, the economy grew only 0.4%, slowing from a 2.5% rise in the previous quarter, well below the reported average 2% and 1.9% GDP growth in the EU and the euro area, respectively.

Bulgaria’s central bank expects 4.1% GDP growth this year and 4.6% in 2022 .The European Commission in its Summer 2021 Economic Forecast published last month sees the Balkan country’s GDP growth reaching 4.6% this year and 4.1% next year.

According to the EU’s executive arm, household consumption is projected to continue to expand in 2022, in line with the improving situation of the labour market.

The European Bank for Reconstruction and Development forecast for Bulgaria’s real GDP growth in 2021 4.5% and 4.0% next year. Focus Economics panelists see the economy expanding 4.3% in 2021 and 4.0% in 2022.

However, political uncertainty in the country, geopolitical issues and growing international instability could threaten economic recovery not only in Bulgaria but in the region as well.

The annual inflation rate ticked up to 3.0% in July from 2.7% in the previous month, the steepest rise in consumer prices since March of 2020. Main upward pressure came from rising transport costs; housing & utilities and food & non-alcoholic beverages.

Inflation is set to accelerate to 1.9% in 2021 on the back of higher assumed energy prices and some second round effects from increased fuel prices. Non-energy industrial goods and processed food are also forecast to sustain stronger price dynamics, the European Commission said.

Last year the Bulgarian economy contracted by 4.2% due mainly to a weak performance of exports and investment, with falls of 11.3% and 5.1% respectively.