Raiffeisenbank (Bulgaria) EAD published its monthly macroeconomic analysis based on Bulgarian data available as of the end of July. According to the bank’s analyst team, the latest reported values of the macroeconomic indicators confirm the signals for domestic demand recovery in the country.

In line with the expectations of the bank, the growth of manufacturing output in May accelerated to 4.8% yoy. Thereby the industrial sector output moved to positive territory, after five months of decrease. A real increase of 3.9% yoy was also recorded for trade volumes, following the declines in the period July 2011 - April 2012. The growth of goods export accelerated, too, reaching 10.7% yoy, which confirmed that the deterioration at the beginning of the year had been temporary, and in general the dynamics of the indicator followed the favourable developments characteristic of the previous two years.

At the same time, the deterioration of the current account and the trade balance vs. a year earlier continued which is considered a positive signal as it was due to the improvement of the economic activity in the country and the need to import goods. In May the import of goods augmented rapidly – by 19% vs. a year earlier, and investment goods were the main contributing factor from the beginning of 2012.

Other indications of investment activity recovery were also observed, after it remained suppressed for quite a long time. The dynamics of financial flows to and from the country were more favourable compared to the previous year. For the first five months of 2012 the cumulative net current transfers reached EUR 1 bn (by EUR 310 mn more on an annual basis), and net foreign direct investment (FDI) totalled to EUR 408 mn (vs. only EUR 15.5 mn a year earlier). Also, the outflow of currency and deposits in January-May 2012 shrank on an annual basis, which means that there was a larger financial resource available in the country, and it could be used to expand the investment activities of the companies.

An indirect indicator for the improvement of the economic environment and investment in particular was the acceleration of the lending growth rate to 3.8% yoy, mainly through the non-financial enterprises channel. For households, however, lending stagnated, and even registered a decline of 1%.

„The main indicators show that the recovery has slowly and elusively been gaining momentum since the beginning of the spring”, commented the Chief Economist of Raiffeisenbank Kaloyan Ganev. „With a view to the lengthier-than-expected crisis situation in the country this cannot be ignored as a positive fact. Unfortunately, during the last several weeks threats have again clouded the Eurozone and if the results of the bigger economies deteriorate additionally, this would affect negatively the Bulgarian economy, too. Currently we are facing uncertainty once again, but we will hold on for a while before we possibly review our forecasts”, Ganev added.