In 2015, Bulgaria’s economic growth is expected to remain subdued at 1.2%, according to forecasts of the World Bank, the European Bank for Reconstruction and Development, and the International Monetary Fund. The country’s government should carry out structural reforms and improve the business environment in order to step up growth. Bulgaria's fiscal policy is expected to tighten, and the contribution of exports is expected to increase on the back of better growth prospects in the Eurozone, the country’s main trading partner.
Bulgaria's gross domestic product (GDP) grew by 1.7% in 2014 thanks to external factors such as the economic recovery of the other EUmember states, rather than an improvement of the local economic environment. Declining unemployment and increasing consumption were among the factors which backed economic growth, while the expanding trade deficit and gross external debt placed macroeconomic stability at risk.
Another factor that put pressure on the country's economy in 2014 was the collapse of Corporate Commercial Bank (Corpbank), the country's fourth largest lender. In June 2014, the Bulgarian National Bank placed Corpbank under special supervision over risk of insolvency and appointed two conservators after it notified the central bank it had run out of liquidity. Payments and all types of banking operations were suspended. In November, the Bulgarian National Bank revoked the license of Corpbank and the Bulgarian parliament mandated the government to start negotiations with foreign banks on a debt of up to 3.0 billion levs to be issued in a temporary loan to the Bank Deposit Guarantee Fund in order to secure the stability of the local banking system.
In 2014, Bulgaria's economy benefited from more than 1.4 billion euro of remittances from Bulgarian emigrants, according to data from the World Bank. Remittances to Bulgaria were growing steadily in the 2010-2014 period after a slump in 2009 due to the global economic downturn.
In the World Bank's Doing Business 2015 report Bulgaria ranked 38th, two places below its position in the previous year's report. The country improved its rankings only in two of the 10 categories – Trading Across Borders and Registering Property. However, the government made starting a business easier by lowering registration fees, the report noted.
The country improved its ranking in the Global Competitiveness Report 2014-2015 published by the World Economic Forum. Bulgaria ranked 54th among 144 countries, thus being one of the best performers among the countries in Southeast Europe. The key factors which put pressure on the country's
competitiveness, were corruption, bureaucracy and insufficient access to financing. In the 2013-2014 report Bulgaria ranked 57th out of 148 countries.
The country's GDP totalled 75.745 billion levs in 2014, according to data of the National Statistical Institute (NSI). Final consumption, which contributed 80.0% to the GDP, increased by 2.4% in value in 2014. Gross capital formation went up by 2.8%, contributing 21.7% to the GDP. Both imports and exports grew - by 3.8% and 2.2%, respectively.
The gross value added (GVA) generated by the national economy increased by nominal 1.6% y/y in 2014 and totalled 65.030 billion levs. The industrial sector grew by 2.1% in terms of value and its share in the GVA structure inched up to 22.7% from 22.6%. The services recorded a 1.2% annual increase, getting a 66.0% share in the GVA, down from 66.3% in the previous year. The agricultural sector registered an annual rise of 5.2%, increasing its share in the GVA to 4.8%, from 4.7%. The construction industry also marked a growth, of 1.4%, but its share in the GVA remained unchanged at 6.4%.
Bulgaria turned to an annual average deflation of 1.4% in 2014 from an inflation of 0.9% a year ago.
Unemployment in Bulgaria narrowed to 11.4% of the total labour force in 2014 from 12.9% a year earlier, according to NSI data. The employed population aged 15 years and older was 2.981 million in 2014, up by 1.6%. Unemployment rate among people aged between 15 and 24 went down to 23.8%, from 28.4% in 2013.
Broad money (money aggregate M3) increased by 1.1% to 68.006 billion levs by December 2014, according to data provided by Bulgarian National Bank (BNB). The M2 money supply grew by 1.2% to 67.937 billion levs. Money aggregate M1, or narrow money, jumped by 15.1% to 31.111 billion levs.
Loans to the non-government sector totalled 49.390 billion levs by December 2014, down by 8.2% as compared to a year earlier. Loans to non-financial corporations went down by 11.6% to 31.011 billion levs, while household loans and loans by non-profit institutions serving households inched down by 1.6% to 18.379 billion levs.
The country's gross external debt increased by 6.0% to 39.558 billion euro at the end of December 2014, equivalent to 94.3% of the projected full-year GDP, according to BNB.
The current account surplus narrowed to 18.8 million euro in 2014 from 848.2 million euro in 2013, according to central bank data.
Foreign direct investment (FDI) fell by 7.3% to 1.182 billion euro in 2014, and accounted for 3.1% of the projected full-year GDP, according to BNB data. In 2014, the Netherlands was the biggest foreign investor in Bulgaria contributing 746.6 million euro in FDI, Austria came second with 290.6 million euro and the U.K. was third with 179 million euro.
A breakdown by industries shows that real estate was the leader in terms of attracted FDI - 478.3 million euro, followed by financial intermediation with 163.8 million euro, and electricity, gas and water supply with 102.5 million euro.
Tourism and the travel industry contributed 3.1 billion levs directly to the country's economy in 2014, equivalent to 3.7% of its GDP, according to the World Travel&Tourism Council (WTTC). The direct GDP contribution of the country's tourism and travel industry is projected to rise by 2.0% in 2015.
Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2015