While most Central and Eastern European economies have already reached their cyclical peak and are expected to switch to a lower gear, in Bulgaria the economy’s best results regarding growth have yet to be achieved. Our forecast suggests that GDP growth will reach its peak in 2018, hitting 4.4%. If our predictions about the growth in CEE come true, the average growth of the Bulgarian economy for the 2015–2019 period would be the second strongest in the region behind that reported by Romania, as the latest analysis of the Bulgarian economy by UniCredit’s economic team shows. The data from the analysis entitled Bulgaria Outperforms the CEE Region in Terms of Growth were presented at a special media event by Dan Bucsa, Chief CEE Economist of UniCredit and Christoph Pavlov, Chief Economist of UniCredit Bulbank. Levon Hampartzoumian, Chief Executive Officer and Chairman of the Management Board of UniCredit Bulbank also participated in the event. He described the economic growth of the country as sustainable.

“Bulgaria is amongst the best examples in CEE,” Dan Bucsa said. He explained that although the growth of the economy is above potential, overheating of the economy is not expected neither this year, nor the next one. “Economic growth is regarded as sustainable based on whether it has undermined savings or not.” “We can see that in the case of Bulgaria savings have retained their high levels throughout the years,’’ Bucsa said. He also put an emphasis on the fact that Bulgaria does not have problems with the budget deficit.

Economic revitalization in Bulgaria began with export, followed by consumption and investments.

According to UniCredit’s analysis consumption is expected to continue being the driving force behind growth, with an increase of 4.6% and 4.5% in 2018 and 2019 respectively, which is negligibly under the result of 4.8% reported in 2017. However, the factors driving consumption growth will change. Experts predict an increase in loan-financed consumption and a further betterment of expectations. Household loans are expected to grow from 5% to 10%, depending on the type.

The economy is approaching full employment and salary rise remains stable.

Since the economy is getting close to full employment, UniCredit forecasts that the creation of new jobs will slow down to a little over 30 000 in 2018 and another 20 000 jobs in 2019, which continues to be a significant achievement for an economy in which the working age population decreases annually by approximately 60%. (During the last decade)

Data shows that there is still likelihood of an increase in employment, as the norm for economic activity in Bulgaria continues to be lower than the index of many other CEE countries. For example, Bulgaria has the highest share of young people who neither work, nor study amongst CEE countries. 

Meanwhile, the problem that there are not enough workers is getting worse and an ever increasing number of managers say that this has turned into the biggest challenge facing their companies’ plans for growth. Despite this, UniCredit's analysis shows that there is a smaller number of managers who report that the workforce is insufficient Bulgaria in comparison to other CEE economies.

Following last year’s trends remuneration in some export-oriented sectors such as tourism, IT, transportation and storage will rise at rates lower than average, which would benefit export competitiveness. In other sectors, however, remuneration is growing at rates higher than average (for example, professional, administrative and auxiliary activities). “However, it is clear that a double-digit rise in remuneration is not sustainable in the long-term and the companies in those sectors could come under pressure if these trends continue for too long,” UniCredit's economists conclude.

Revitalizing investments – Machines and Equipment is the most interesting category

The optimistic forecast of UniCredit’s economists for a strong GDP growth during the year is due mainly to an increase in investments.  The first signs of revitalization of investments were spotted way back last year, when they grew by 3.8% in real terms (the biggest growth since 2008). “Investments in residential constructions in the private sector had the biggest contribution in increasing the growth of last year’s investments. Economic growth is expected to accelerate anew in 2018,” UniCredit’s analysis indicates. According to UniCredit group's experts the rise will be boosted by the higher prices of residential buildings, which makes construction entrepreneurs increase the volume of new construction. The larger number of newly-issued construction licenses with a construction area of 6.5 million sq.m. in 2017 attests to this increase. 

UniCredit economists make an interesting comparison between Bulgaria and Romania. “While Romania attracted the attention of the media and journalists, it seems that ever since we became members of the EU the Bulgarian economy has succeeded in attracting more investments in machines and equipment than our northern neighbour,” the analysis shows.

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Additional media information:

Victoria Blajeva, tel +359 (0) 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Beatris Nikolova, tel +359 (0) 2 9232 528, cfbusjt/ojlpmpwbAvojdsfejuhspvq/ch

Ekaterina Ancheva, tel +359 894 518 193 , flbufsjob/bodifwbAvojdsfejuhspvq/ch