Bulgaria – Positive political and economic outlook

Bulgaria

Photo: expat.bg

Nikoly Vassilev, Managing partner and Executive director of Expat Capital, the largest independent asset management company in Bulgaria, recently published a report about the current political and economic state of the country.

Report key points:

  • As a NATO member since 2004 and an EU member since 2007, Bulgaria is enjoying political and economic stability
  • Debt/GDP at 22% and falling, 3rd lowest in the EU
  • GDP growth is 3-4%, salaries are rising by 41% over 4 years (in EUR terms)
  • Budget surpluses since 2016, current account surpluses since 2013
  • Record-low unemployment at 4.2% as of July 2019
  • Investment grade rating of the sovereign debt
  • Accelerating real estate prices
  • A stable banking sector, strong credit growth with falling NPLs (non-performing loans)
  • Joining of the ERM-II mechanism expected by 2020, joining of the Eurozone by 2023
  • Government 9-yr EUR-denominated Eurobonds trading at a 0.27% yield – extremely low

… but a cheap and sleepy equity market

  • SOFIX, the main Bulgarian equity index, has fallen by -21.8% for the last 2 years (since 16 August 2017). The S&P 500 has risen by +25.6% in EUR terms, and the neighbouring Northern Macedonian market by +60% for the same period. The neighbouring Greek market has been up by +50.5% since December 2018.
  • The average (aggregated) P/E for the 15 stocks in SOFIX is 9.6x (12-mo trailing), while P/B is 0.66x – among the lowest valuations for the CEE region