Bulgaria’s GDP contracted by 3.8% year on year in the fourth quarter of this year, but increased by 2.1% quarter on quarter, according to a flash estimate from the National Statistical Institute (NSI) released on February 17.

Bulgaria’s GDP is seen contracting significantly in 2020 due to the coronavirus outbreak, by up to 7%, but is expected to return to growth in 2021.

GDP at current prices amounted to BGN32.07bn (€16.4bn) in the fourth quarter. Gross value added (GVA) stood at BGN27.78bn. GVA decreased by 3.8% y/y in Q4.

The largest contributor to GDP on the expenditure side was final consumption — BGN25.8bn or 80.4% of the total. Gross capital formation was BGN7bn, with a 21.8% share of GDP. The external balance (exports minus imports) was negative.

ING analysts responded to the news by raising their forecast for 2021 growth upwards from 3.3% to 4.1%. 

"Given the electoral context with general elections scheduled for early April, we imagine that some increased fiscal largesse could occur in the first quarter. On top of that, the already approved 10% average increase in public wages starting January 2021 and 5% pension increase starting July 2021 should do just enough to keep private consumption afloat as this sector has taken a severe hit in 2020," ING said in a comment.

However, the bank's analysts added, "the policy visibility beyond the elections is quite blurred right now, as the fragmented political landscape makes it difficult to picture a post-election alliance."