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    Raiffeisenbank: Mixed signals from the economy. Up to 2% growth possible in Q3 and Q4


    Raiffeisenbank (Bulgaria) EAD published the new issue of its monthly economic review based on the Bulgarian economy data available as of the beginning of July.

    The analysts of the bank account for mixed signals concerning the development of the economy from the beginning of the spring, unlike the negative developments which prevailed in the first quarter of the year. In April industrial production declined by 2.8% yoy, but at the same time the manufacturing branch was on positive territory with an annual increase of 0.8%. According to the bank’s analysts, this was related to the diminished negative influence of the external environment, specifically on the account of imports. The review notices that after the contractions in the first two months of 2012, in March and April the exports of goods increased albeit at minor rates – respectively 1.9 and 2.5%. On the other hand, the ongoing recovery of domestic demand is also related to the current account deficit of EUR 158.7 mn in April.
    The analysts report a deceleration of the process of foreign liabilities repayment from the beginning of the year, which is expected to affect favourably the economic activity. In the first four months the net repaid intra-company loans were of considerably lower size vs. a year earlier, as a result of which the net foreign direct investments in Bulgaria reached EUR 368.2 mn vs. only EUR 14.3 mn for the same period of the previous year.
    Services’ dynamics continued being weak as a result of the late beginning of the recovery of domestic demand. The condition of the labour market acted as a constraint on consumption growth.
    During the reviewed period a decline of unemployment to 12.2% was reported, mainly due to seasonal factors, but the analysis notes that in general no sustainable recovery of the labour market was observed.

    With a view to fiscal policy, the execution of the state budget improved, and for the second consecutive month a surplus was registered (BGN 284.6 mn), and thus the cumulative budget balance from the beginning of the year turned positive amounting to BGN 67.4 mn.

    „The forecasts of the Raiffeisen group point to a comparatively good performance of Central and Eastern Europe this year, so our expectations are that Bulgaria will not be an exception of the overall trend”, commented Raiffeisenbank’s Chief Economist Kaloyan Ganev. „However, economic growth in our country will be significantly more modest that those of countries like Russia or Poland. In this context, a sustainable recovery of the labour market is not possible, so in the near future no lasting solution of the unemployment and income growth issue is emerging”, Ganev added.


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