The European Commission Identified No Macroeconomic Imbalances in Bulgaria
NW 15:18:31 24-11-2021
KK1516NW.113
113 ECONOMY - MACROECONOMICS - GDP
The European Commission
Identified No Macroeconomic Imbalances
in Bulgaria
Brussels, November 24 (BTA) - In June 2021, no macroeconomic imbalances were identified in Bulgaria, according to data from the Alert Mechanism Report 2022 of the European Commission. In the updated scoreboard including figures until 2020, the unit labour cost (ULC) growth indicator is above their indicative thresholds.
After contracting by 4.4 per cent in 2020, real GDP is expected to grow by 3.8 per cent in 2021 and by 4.1 per cent in 2022. With the return to economic expansion, nominal GDP in 2022 is forecast to be 17 per cent above its 2019 level.
A number of relevant developments can be summarised as follows:
- The current account balance registered a small deficit of 0.3 per cent of GDP in 2020, for the first time since 2012. Its decline was mainly due to the contraction of exports of tourism services caused by the COVID-19 pandemic. A recovery of tourism revenues has started in 2021 and is expected to continue in 2022. The negative NIIP, largely consisting of foreign direct investment, continued to improve on account of further accumulation of reserve assets.
- Nominal unit labour costs increased further in 2020 driven by somewhat lower headline productivity in a context of labour hoarding. Going forward, unit labour costs are expected to continue increasing markedly even if less than in 2020, despite recovering productivity growth, as compensation per employee is set to increase strongly.
- Corporate indebtedness increased in 2020, but deleveraging is expected to resume with the economic recovery. Although credit growth moderated, the sharp decline of GDP in 2020 temporarily reversed the process of debt deleveraging that had been based on strong nominal GDP growth. With the return of economic growth, the corporate debt-to-GDP ratio should return to a downward path. The real growth rate in house prices increased to 5.2 per cent in 2020. It is set to moderate somewhat in 2021, but is supported by buoyant mortgage credit growth.
- Government debt was below 25 per cent of GDP in 2020 and is set to remain below 30% of GDP in 2021 despite the planned increase of government expenditure.
- The financial sector maintained sufficient liquidity and capital adequacy during the COVID-19 crisis, supported by the measures the Bulgarian National Bank introduced in March 2020 and the entry of Bulgaria into the Banking Union in July 2020. The non-performing loans ratio remains high, although it declined further to 5.9% in 2020. It will be important going forward to monitor closely the effect of the phasing out of public support measures, such as the loan moratoria and the guarantee schemes.
- The labour market conditions were not particularly affected by the recession in 2020 largely thanks to the use of short-time work schemes. The unemployment rate increased to 5.1 per cent in 2020 from a historical low level in 2019, but is forecast to start declining as of 2022.
Bulgaria entered the COVID-19 crisis with no identified macroeconomic imbalances, although non-performing loans and corporate indebtedness were relatively high, albeit declining. With the COVID-19 crisis, the private sector debt-to-GDP ratio increased temporarily in 2020, but is set to decline afterwards. Wage compensation is expected to continue its pre-pandemic growth path. Overall, the Commission does not consider it necessary at this stage to carry out further in-depth analysis in the context of the MIP. RY/KK
/КК/
KK1516NW.113
113 ECONOMY - MACROECONOMICS - GDP
The European Commission
Identified No Macroeconomic Imbalances
in Bulgaria
Brussels, November 24 (BTA) - In June 2021, no macroeconomic imbalances were identified in Bulgaria, according to data from the Alert Mechanism Report 2022 of the European Commission. In the updated scoreboard including figures until 2020, the unit labour cost (ULC) growth indicator is above their indicative thresholds.
After contracting by 4.4 per cent in 2020, real GDP is expected to grow by 3.8 per cent in 2021 and by 4.1 per cent in 2022. With the return to economic expansion, nominal GDP in 2022 is forecast to be 17 per cent above its 2019 level.
A number of relevant developments can be summarised as follows:
- The current account balance registered a small deficit of 0.3 per cent of GDP in 2020, for the first time since 2012. Its decline was mainly due to the contraction of exports of tourism services caused by the COVID-19 pandemic. A recovery of tourism revenues has started in 2021 and is expected to continue in 2022. The negative NIIP, largely consisting of foreign direct investment, continued to improve on account of further accumulation of reserve assets.
- Nominal unit labour costs increased further in 2020 driven by somewhat lower headline productivity in a context of labour hoarding. Going forward, unit labour costs are expected to continue increasing markedly even if less than in 2020, despite recovering productivity growth, as compensation per employee is set to increase strongly.
- Corporate indebtedness increased in 2020, but deleveraging is expected to resume with the economic recovery. Although credit growth moderated, the sharp decline of GDP in 2020 temporarily reversed the process of debt deleveraging that had been based on strong nominal GDP growth. With the return of economic growth, the corporate debt-to-GDP ratio should return to a downward path. The real growth rate in house prices increased to 5.2 per cent in 2020. It is set to moderate somewhat in 2021, but is supported by buoyant mortgage credit growth.
- Government debt was below 25 per cent of GDP in 2020 and is set to remain below 30% of GDP in 2021 despite the planned increase of government expenditure.
- The financial sector maintained sufficient liquidity and capital adequacy during the COVID-19 crisis, supported by the measures the Bulgarian National Bank introduced in March 2020 and the entry of Bulgaria into the Banking Union in July 2020. The non-performing loans ratio remains high, although it declined further to 5.9% in 2020. It will be important going forward to monitor closely the effect of the phasing out of public support measures, such as the loan moratoria and the guarantee schemes.
- The labour market conditions were not particularly affected by the recession in 2020 largely thanks to the use of short-time work schemes. The unemployment rate increased to 5.1 per cent in 2020 from a historical low level in 2019, but is forecast to start declining as of 2022.
Bulgaria entered the COVID-19 crisis with no identified macroeconomic imbalances, although non-performing loans and corporate indebtedness were relatively high, albeit declining. With the COVID-19 crisis, the private sector debt-to-GDP ratio increased temporarily in 2020, but is set to decline afterwards. Wage compensation is expected to continue its pre-pandemic growth path. Overall, the Commission does not consider it necessary at this stage to carry out further in-depth analysis in the context of the MIP. RY/KK
/КК/
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