Bulgaria’s economic growth in the second quarter of 2021 is unusually strong – 9.6% on an annual basis, according to the express estimates of the National Statistical Institute (NSI). However, this is not a surprise given the drastic decline in GDP during the crisis in April and May last year.

On a quarterly basis, however, the increase is much more modest – only 0.4% compared to the first months of this year. This is well below the reported average 2% and 1.9% GDP growth in the EU and the euro area, respectively, and is among the weakest changes on a quarterly basis in the union. But the difference can be explained by the fact that large economies in Europe contracted in the first quarter due to pandemic measures and the EU average declined, while in Bulgaria GDP rose by 2.5% on a quarterly basis.

Most macroeconomic forecasts have been revised upwards in recent weeks and rely on Bulgarian GDP growth of over 4% for 2021. However, the risks are increasing – political uncertainty, pandemic development, and growing international instability could threaten the economic recovery.

The big driver of the economy in the second quarter seems to be consumption again – with the growth of 6.7% on an annual basis and 2.5% on a quarterly basis. A significant factor for the higher level is probably the lifting of restrictions against the spread of the coronavirus in the period April – June, increased wages in the public sphere, and the improving labor market. In turn, better prospects for the economy in the future will give additional confidence to households to spend their disposable income.

Investment is also up in the second quarter – the gross fixed capital formation indicator increased by 4.2% on an annual basis and 0.6% on a quarterly basis. Most macroeconomic forecasts call for investment growth to accelerate due to the European Recovery Plan, but Bulgaria has not yet submitted it. It is possible that this year will be relatively weak for the country, given the political instability, because uncertainty about the future of economic policies in the country is holding back some investment plans of companies.

Foreign trade contracted slightly in the second quarter – exports of goods and services decreased by 0.6% on a quarterly basis, while imports contracted by 0.7%. However, current price data show an increase in both goods and services, which means that much of this growth is likely to be due to inflation. On an annual basis, however, the increase was in double digits – 20.3% for exports of goods and services and as much as 28.6% for imports.