The clouds over the Bulgarian economy are thickening

Bulgaria's gross domestic product in the fourth quarter of 2022 increased by 2.1% compared to the same period last year. Express data from the National Statistical Institute (NSI) also show that the economy grew by 0.5% in the autumn and early winter season – which turned out to be mild – in relation to the summer period. The NSI recorded the increase amid a political crisis in the country and growing signs of a deterioration in the external economic environment.

Growth in the Bulgarian economy in the final quarter of last year was significantly below the figures for the same quarter in 2021, which was one of the strongest since 2008.

The data show that Bulgaria's GDP growth has slowed substantially compared to the summer, when real gross domestic product increased by 3.3% from the comparable period a year earlier.

The flash estimates are the earliest picture of the development of the Bulgarian economy. Economic.bg's report shows that annual growth in the final three months of last year was the weakest since the first quarter of 2020, when the pandemic was already impacting economic activity.

With the exception of the pandemic, the statistics have not reported such a weak autumn since 2014, the year in which the Corporate Commercial Bank went bankrupt.

According to the statistics, final consumption – of the government and of households in Bulgaria — is growing at 4.7% year on year, a significant slowdown compared to the third quarter, although the last three months of the year are characterised by more spending around the festive month of December and by higher government spending, which in the last months of each year catches up with the backlog on some spending items.

Gross capital formation or investment in Bulgaria declined by 3.3% and imports of goods and services significantly outpaced exports, by 10.7% against 7.2%. Last year was a record year for both exports and imports, helped by inflation, but last week's data for December shows that the clouds over trade are beginning to thicken because of the contraction in Bulgaria's trading partners, as well as slowing inflation in the region.

The data now presented lacks detail on the individual components of consumption — whether household or government spending rose more. Such details will be available with the first revision of the data, due on March 8. Data on economic growth for the whole of 2022 are expected then. It is expected to be in the range of 3.4% (BNB forecast) to 3.9% (European Commission forecast).

In Europe

Later on Tuesday came the Eurostat data, which showed that despite its slowing economy, Bulgaria is among the top half of the European Union in terms of GDP growth. Only a handful of countries — Ireland, Cyprus, Romania, Denmark, the Netherlands — recorded higher growth than Bulgaria.

Only Lithuania and Sweden saw their economies contract on a year-on-year basis at the end of last year, while half of European countries, including the Czech Republic, Germany, Italy, Hungary, Poland and Finland, saw their economies contract on a quarterly basis. Data for some countries are missing.