This report covers the key macroeconomic and financial releases as well as the political events from Bulgaria for the period of April 8, 2014 - May 8, 2014.

Both the EC and the IMF left their latest GDP growth forecasts for Bulgaria unchanged from their previous estimates. The EC projects that Bulgaria's economy will grow by 1.7% in 2014, while the IMF has a slightly less optimistic forecast for 1.6% growth. In comparison, the government expects GDP growth of 2.1% this year.

Consumer price deflation eased to 2.3% year on year in March 2014 from 2.6% year on year in February mainly due to the low base effect of last year when electricity costs dropped 6.1% m/m but remained unchanged in the same month of 2014. It is expected that the price level will continue to face upward pressure in the coming months as the effects from the cuts in the regulated prices fade entirely. In addition, food and energy costs are seen rising.

The overall business climate indicator increased by 1.7 points month on month in April after advancing by 1.2 points in the previous month on improved outlook in manufacturing, construction and retail trade. The outlook in manufacturing alone improved by 1.4 points month on month in April mainly because managers in the sector are now expecting more favourable business environment in the next six months.

However, industrial companies plan to reduce capital expenditure this year, with the total investment in the sector expected to shrink 6.3% year on year, following a 6.3% year on year growth in 2013, according to a survey carried out by the statistics office.

Key points:
• General budget deficit widens 9.8% year on year to EUR 447mn in Q1 2014, reaches 1.1%/GDP
• March unemployment rate stays flat at 9-year high of 12.2% - labour agency
• Home prices flat year on year in Q1 2014 after falling for 20 straight quarters
• Current account gap narrows 24% year on year to EUR 385mn in Jan-Feb 2014
• Banking sector net profit up 34% year on year to EUR 114.4mn in Q1 2014