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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

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