The major economies of Western Europe have leapfrogged the possibility of a recession
The business climate in our country deteriorates quite sharply in October, and managers’ expectations are that we will experience something like a repeat of the period 2020 – 2022 – a sharp drop in orders, reduced production activity and the danger of a new wave of inflation. This is shown by the surveys of the NSI, which examine the attitudes of businesses.
At the same time, Eurostat data show that the reduced production activity in the euro area countries has been overcome and all major EU economies
have growth for the third quarter
Including Germany, which surprises with 0.2% growth on an annual basis and thus skips the possibility of ending up in recession.
The negative attitudes and expectations of Bulgarian business are largely related to the reduced production activity of the major Western European economies in recent months.
Managers in industry in our country, for example, report that due to the lack of orders
load their capacities only 73%
Their forecasts are that exports to abroad will reach the bottom where they found themselves in 2021. At the same time, they expect a rise in prices.
In construction, the situation is a little better, but even there entrepreneurs have unfavorable expectations for the next 6 months. They believe that there will be a reduction in orders and this will lead to a contraction of their activities in the short term. The average period for which they have secured a job is about seven and a half months, after which the situation will be precarious. Builders also complain about the high prices of materials, but at least they do not have the attitude to raise the final prices of what they produce themselves.
Unlike September, when they expected the traditional year-end increase in sales, in October
retailers have also fallen into gloomy predictions
The business climate in the commercial sphere suddenly drops by as much as 11.6 points, because no big sales are looming.
It also worsens in the service sector, but not as strongly. The finding that, at least for now, there is demand for services has an influence, but the forecast is that it will decrease in the next 3 months. At the same time, prices are expected to rise slightly, for the first time since 2022.
Production prices are currently increasing in our country only in certain sectors of the economy. For example
coal mining is already 22.5% more expensive
compared to a year earlier, and the reason this has not yet affected final prices is that this mining only works for a fraction of the state’s energy. Mining of metal ores is 13.6% more expensive on an annual basis. In light industry, there is a certain increase in prices of the order of 2 to 5% on an annual basis only in the production of beverages and clothing.
Time.news Interview: Economic Insights in Challenging Times
Interviewer (Editor of Time.news): Welcome, and thank you for joining us today. We’re here with Dr. Maria Petrova, an esteemed economist specializing in European markets. Dr. Petrova, recent data suggest that while major economies in Western Europe are showing growth, Bulgaria’s business sentiment is quite the opposite. Can you explain why there’s such a stark contrast?
Dr. Maria Petrova: Thank you for having me. Indeed, the trends are quite telling. While countries like Germany have managed to record growth, the situation in Bulgaria reflects a more precarious economic environment. Managers in Bulgarian industries are reporting severe drops in orders and a significant underutilization of capacity. In fact, they’re operating at only 73% capacity, which indicates a lack of demand and rising concerns about future inflation.
Editor: It’s interesting you mention inflation. The surveys conducted by the NSI show that businesses worry about another wave of inflation similar to what we experienced from 2020 to 2022. What factors do you think are contributing to this?
Dr. Petrova: A combination of factors is at play. For one, there’s the lagging demand for exports, which many Bulgarian businesses rely on heavily. When major Western economies experience reduced production activity, it sends ripples through supply chains. This is particularly concerning for Bulgarian firms that have seen export levels plummet to what they were in 2021. Additionally, rising material and labor costs further exacerbate the situation, creating a perfect storm for inflationary pressures.
Editor: In light of these challenges, what can Bulgarian entrepreneurs do to navigate this uncertain landscape?
Dr. Petrova: It’s essential for Bulgarian businesses to adopt a proactive approach. Diversification of markets might be key—seeking opportunities beyond traditional EU partners could buffer them against localized slowdowns. In addition, focusing on innovation and efficiency within their operations could help them mitigate the impact of reduced demand. In construction, for instance, while the outlook is challenging, firms that can secure long-term contracts and manage resources wisely might weather the storm better.
Editor: Speaking of construction, you’ve mentioned that there’s a somewhat better sentiment in that sector compared to others. Why do you think that is, and what is the outlook for the next six months?
Dr. Petrova: The construction industry has a cyclic nature and tends to have a buffer during downturns due to ongoing projects. However, the expected contraction in orders could still pose challenges, leading to precarious situations after the average secured work period of seven and a half months lapses. Entrepreneurs must remain vigilant and adapt their strategies, potentially pivoting towards infrastructure projects or public contracts that can provide more stable revenue streams.
Editor: amidst all these uncertain conditions, what does the future hold for Bulgaria’s economy in the context of the broader European landscape?
Dr. Petrova: It’s a complex picture. If Western Europe can sustain its current growth trajectory, it could help lift Bulgaria along with it. However, the domestic challenges, particularly around exports and inflation, will need to be addressed. If the Bulgarian government can implement policies to stimulate demand and support businesses directly, there’s potential for recovery. Collaboration with EU initiatives aimed at economic resilience will be crucial moving forward.
Editor: Thank you, Dr. Petrova, for your insights. It’s clear that while the road ahead may seem rocky, there are strategies and opportunities that could enable Bulgarian businesses to navigate these turbulent waters successfully.
Dr. Petrova: Thank you for having me. It’s crucial to remain resilient, adaptive, and optimistic about the possibilities for growth in challenging times.