GDP contracted by 4.8%y/y in 2Q09 according to a flash estimate by the National Statistical Institute (NSI). Consumer demand further worsened in the second quarter, while gross fixed capital investment stabilized, albeit at a very low level. The contraction in domestic demand was partly offset by positive net exports. The headline figure turned out slightly better than the consensus forecast of -5.0%.
The individual components of Bulgaria's GDP developed more or less in line with our expectations. Consumer demand deteriorated in the second quarter, consistent with consumption trends in most European countries. The stabilization in gross fixed investment also lends suppport to our view that the corporate sector of the economy will probably turn around faster than private households. The risk is that austerity measures recently imposed by the new government will negatively affect private consumption and pull Bulgaria's economy deeper into recession. However, we reiterate our full-year forecast of -4.0% GDP growth in 2009, based on the assumption that economic activity will recover later this year and going into 2010.