by Dimana Trankova; photography by Anthony Georgieff

Bulgaria's economy, society, finances after 6 months of Covid-19

bank of bulgaria.jpg

Six months after the Covid-19 pandemic forced the world into lockdowns and uncertainties, a fuller picture of its effect on the world economy is beginning to emerge. Bulgaria fared not too bad, according to recent statistical data.

According to Eurostat, in the second quarter of 2020 Bulgaria's GDP fell 9.8 percent in comparison to the same period of 2019. The result is better than in most of the EU, where average GDP fell by 14.4 percent and France experienced a decrease of 19 percent.

Unemployment data also looks encouraging. According to the National Statistical Institute, or NSI, between April and June 6 percent of Bulgarians were unemployed (Eurostat data claims a seasonally adjusted result of 4.6 percent in May). This is a significant increase from the 4.2 percent on a year earlier, but fits the EU's average of 6.7 percent. It is much better than Spain's 14.5 percent.

Data released in August by the Bulgarian National Bank, or BNB, shows a negative trade balance of 0.4 percent of the GDP for January-June 2020, compared to 1.6 percent on a year earlier. Exports have dropped by 7.5 percent and imports have decreased by 12 percent.

The average annual inflation for 2020 is 2.6 percent higher compared to 2019, according to the NSI. The biggest increase in prices was in the tourism and holiday industry (16 percent), central heating services (15 percent), bank and financial services (11 percent), and entertainment and culture (7.4 percent).

The NSI's traditional consumer attitude survey for July 2020 shows that consumer trust has increased by 3.3 percent in comparison to April 2020. Villagers are more optimistic than urban residents that the economy will improve in the next 12 months.

Notwithstanding the government's less-than-efficient policies to help households and companies mitigate the effect of the lockdown, the numbers look encouraging, yet it is too early to celebrate. As a general rule, trends in the Bulgarian economy tend to lag behind the economies of its main EU trading partners. Bulgarian citizens returning from the EU during the lockdown injected fresh cash into the country and its economy.

The data also does not cover summer tourism, a sector that is among the most heavily affected globally. Preliminary figures are devastating. In June 2020, the NSI registered a staggering 88 percent drop in revenue for hotels and other holiday accommodation compared to June 2019. As package tourism crashed and charter flights to the Black Sea resorts were cancelled, four- and five-star hotels suffered the heaviest blow. In June 2020, only 31 percent of hotel guests were foreigners, a decrease of 95 percent compared to June 2019.

Tourism is not the only sector affected by the crisis. According to the NSI, during the lockdown Bulgarian households cut back consumption on everything, except alcohol and tobacco products. A survey among Bulgaria's largest supermarket chains showed a 23 percent drop in customers and 11 percent decrease in profits in the first half of 2020, a direct result of lockdown. Customer behaviour also changed dramatically. The hectic stockpiling of nonperishable foods and toilet paper at the beginning of the lockdown was followed by more level-headed and pragmatic purchases afterwards.

There are also some paradoxical results. In July 2020, the government reduced VAT on food and alcohol sold by restaurants and bars from 20 to 9 percent. This change was promoted as a measure to help a sector that was suffering heavily from the lockdown, and professional organisations claimed that it would result in lower end prices. According to the NSI, however, the opposite happened: in July 2020 restaurant prices increased by 2 percent.

The BNB reports that in the second quarter of 2020 loans in arrears increased by 14 percent, the result of Bulgarians losing jobs and incomes during lockdown. The good news is that overdue loan payments make up only 7 percent of all loans, a significant decrease from the 20 percent registered in 2016.

Banks and companies are getting more cautious and lending continues to decrease, a trend that started before the Covid-19 pandemic. In the second quarter loans have grown by 4.9 percent on an annual basis, compared to 7 percent in March 2020.

Unsure about the future, Bulgarians continue to keep their money in banks, despite the record low interest rate, an average of 0.1 percent. BNB data shows that in June 2020 household deposits reached 57 billion leva, which is 4 billion leva more than in June 2019. The devil is in the details. BNB data shows that during the lockdown small savers closed about 150,000 deposit accounts with less than 1,000 leva in them and more than 23,000 accounts with up to 2,500 leva in them. Just like everywhere else, in Bulgaria, too, the rich got richer during the crisis. Deposits of between 50,000 and 500,000 leva rose by 10 percent and deposits over 1,000,000 leva saw a 14 percent increase. Forty-five more Bulgarians joined the ranks of millionaires.

Meanwhile, Bulgarian businesses struggle to collect money and payments from... the state. According to the Economy Ministry, by the middle of 2020 national and local governments are yet to pay 220 million leva to companies and citizens. This is why it is hardly a surprise that many companies are on the verge of collapse. A survey by the NSI showed that in July 34 percent of all companies reported a decline in their revenues, 13 percent sent employees on unpaid furlough, 8 percent fired staff and 3 percent reduced salaries. 


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