Bulgaria: political uncertainty weighs on growth but financial stability maintained

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Bulgaria: political uncertainty weighs on growth but financial stability maintained

  1. 1. Bulgaria: political uncertainty weighs on growth but financial stability maintained Dieter Franceus GCE
  2. 2. 2 Bulgaria Political uncertainty Parties in Parliament ( number of seats) GERB 97 BSP 84 MRF 36 Attack 23  Demonstrations in late February against high electricity prices triggered the resignation of the government of the center-right ruling party GERB.  May elections produced a divided parliament. Former opposition parties BSP (former communists) and Movement for Rights and Freedom (MRF, mainly supported by the ethnic Turkish minority) agreed on a coalition, but lacked majority with 120 seats out of 240. Therefore the government depends on the implicit support of the small ultranationalist party Attack.  This weak center-left government has already lost legitimacy after some highly controversial appointments.  This has triggered again large-scale protests but the government refuses to resign.
  3. 3. 3 Bulgaria Disappointing growth 0.1% decrease of Q2 real GDP vs. Q1 (Qoqa, in % ) Negative momentum going into Q3 (Qoqa, in %) -10 -8 -6 -4 -2 0 2 4 6 8 10 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Private consumption Government consumption Investments Net exports Inventory and errors GDP growth -10 -5 0 5 10 15 Industrial production Retail sales Export
  4. 4. 4 Bulgaria Financial stability maintained Fiscal reserve (% of GDP) Government bond yields (in %) 0 2 4 6 8 10 12 14 0 1 2 3 4 5 6 Bulgaria Germany Headline CPI (year-on-year, in %)
  5. 5. 5 -5 -4 -3 -2 -1 0 1 2 3 General budget balance Cyclically adjusted Structural balance 0 10 20 30 40 50 60 70 Budget balance (% of GDP) Gross government debt (% of GDP) Source: European Commission Source: European Commission Bulgaria Strong fiscal fundamentals
  6. 6. 6 Current account (% of GDP) Financial account (% of GDP) -35 -30 -25 -20 -15 -10 -5 0 5 10 15 Goods Services Income Current transfers Current account -30 -20 -10 0 10 20 30 40 50 Direct investments Portfolio investments Other investments International reserves Current account Source: Eurostat Source: Eurostat Bulgaria Solid external position

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