Raiffeisenbank (Bulgaria) EAD publishes its regular monthly economic analysis with comments on the macroeconomic data available in September.

According to the analysts of Raiffeisenbank, in August the deflation returned to the Bulgarian economy. “In August the consumer price index declined again (-0.2% mom), whereas in July it increased by 0.4% mom", commented the economic analyst at Raiffeisenbank Emil Kalchev. On the other hand, the seasonally adjusted inflation (12-month moving average of the monthly rates of change in the index) has been consistently below zero since August last year. Despite the fact that its value has constricted since February this year, reaching -4.5% in August, the deflation has permanently being present in the Bulgarian economy over the last 12 months, restraining the GDP growth", he added.

However, bank analysts expect that the current policy of the European Central Bank, aimed at rising inflation in the Eurozone, will affect the deflationary tendencies in Bulgaria as well. The increase in electricity prices in October will also influence the price dynamics in the same direction. Nevertheless, this process is possible to be delayed.

According to Kalchev, the budget deficit is ominously escalating. "By July 2014, a gross budget deficit of BGN 1.15 bn has been accumulated, which is BGN 979.1 mn more than the deficit for the same period last year. Compared to June this year the deficit increased by BGN 151.6 mn. The main reason for this situation is too optimistic revenue projection in the budget; therefore, expenses appeared inadequately high. A new public debt needs to be issued to cover the additional deficit.”

The analysis of Raiffeisenbank states, that the current account remained positive in July (EUR 594.3 mn), moving into the positive territory for the third consecutive month. The positive balance of services and net transfers from Bulgarians living abroad seriously supported the current account balance.

On the other hand, BNB monetary statistics showed an increase in the coverage of the monetary base with international reserves, which reached 183.3% as of July, ensuring the currency board stability. Despite the mom decline in loans (-0.2%), their yoy increase continued, for the sixth consecutive month. However, the level of non-performing and restructured loans remains high at 22.2% as of June. The analysts of Raiffeisenbank reported also that deposits registered again an increase in July: by 0.7% mom and by 7.4% yoy.