Bulgarian economy in good shape at mid-year

Bulgaria's economic activity has maintained a steady pace in the second quarter of 2021, benefitting from one of the least restrictive pandemic-related measures in the EU.

As the yearly growth rates are still heavily distorted by base effects and the subsequent re-opening, we prefer to focus on monthly and quarterly seasonally adjusted growth rates. From this perspective, retail sales have expended almost every month since May 2020, with only one small hiccup in February 2021 when sales contracted by 0.1% versus the previous month.

In June alone, sales expanded by 1.4%, taking the quarterly expansion to 4.6%. The main driver remained non-food items which grew by 7.4% over the quarter, most likely boosted by strong sales in the DYI sector. Fuel sales have also expanded by 5.0% over the same period, followed by food items with a 3.3% advance.

Industrial output grew by 2.0% in the second quarter versus the previous one, marking the fourth consecutive quarterly expansion.

The underlying growth structure, however, looks relatively weak, as the manufacturing sector - most important by its weight in the overall index - has only expanded by 0.8% in the second quarter, while in monthly terms, it has, in fact, contracted every month since April. This might indicate that the industrial recovery has reached its limits for now.

With the external context not exactly poised for imminent growth, the short-term outlook for the Bulgarian industry in 2H21 should be flat at best.