Wednesday, June 20, 2007

Bulgarian Growth

According to this Bloomberg article:

Bulgaria's economy accelerated in the first quarter, driven by consumer spending and investment during the first three months of European Union membership.

The Balkan country's $31.5 billion economy grew an annual 6.2 percent, compared with 5.7 percent in the previous three-month period, the statistics office said in an e-mailed statement from Sofia today. The result beat the median estimate of 6 percent by five economists surveyed by Bloomberg. The economy grew 5.5 percent in first quarter of 2006.

Bulgaria sold its Jan. 1 EU entry on promises that membership will drive up wages and investment and help the economy catch up with the rest of the EU. Gross domestic product in the 13-nation euro zone, where 65 percent of Bulgarian goods are sold, expanded 3 percent in the first quarter.

The nation of 7.8 million people has per-capita GDP that is one-third of the EU average, the lowest in the bloc, and relies on growth to raise living standards.

Growth in 2006 slowed to 6.1 percent from a revised 6.2 percent in 2005. Bulgaria's growth rate trails other EU countries, including Lithuania and Latvia, which grew an annual 16.6 percent and 11.2 percent, respectively.

Gross fixed capital formation grew 36 percent in the third quarter after increasing 23.8 percent in the fourth quarter on imports of equipment and new cars, while end-user consumption rose 7 percent, after 6.1 percent growth in the fourth quarter, the statistics office said.

Exports rose 2.2 percent and accounted for 60.1 percent of GDP from 55 percent in the fourth quarter. Imports rose 13.2 percent comprising 88.8 percent of GDP from 83 percent in the previous quarter.

Gross value added by industry rose 7.6 percent and accounted for 27.4 percent of GDP, the office said. Services' GVA rose 8.1 percent, comprising 50.5 percent of GDP. Agriculture's gross value added rose 2.5 percent, while its share of GDP shrank to 3.8 percent from 5.4 percent in the fourth quarter.

Foreign investment reached 4 billion euros ($5.3 billion) in 2006, a 17-year record. January-April investment was 1.15 billion euros.


Of course, all this growth is producing a pretty dramatic decline in unemployment:

As can be seen from this Eurostat chart, wages costs in Bulgaria rose by some 15.9% y-o-y in Q1 2007. So given the dramatic rate at which unemployment is declining the capacity issue is likely to arise pretty quickly. In fact the unemployment rate in Bulgaria in May 2007 is set to decrease to nearly 8.0% compared to 8.38% in April, according to Labour and Social Policy Minister Emilia Maslarova.

(please click on table for better viewing)

According to this Bloomberg article:

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