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The economic downturn is not yet an apocalypse, but in some industries it already is.
When the coronavirus pandemic began and countries one by one introduced restrictive measures, the worst forecast for the economy this year was that the EU’s GDP would shrink to 8.7% by the end of 2020.
Naturally, everyone expected the peak of deterioration to occur exactly in the second quarter, which spans April, May and June. At that time, people were home in droves, many industries were closed, and an entire entertainment industry was barely functioning.
According to the latest preliminary data from the INE, the annual decrease in the gross domestic product in Bulgaria in the second quarter was 8.5%. This is slightly more than the minus 8.2% of the express data published a month ago. But even so, and although it is the steepest annual decline in our country, it is obvious that the economic apocalypse has long passed. Because it is clear that the recovery in the third and fourth quarters will almost erase this decline, and unless something more extreme happens, 2020 will end with little or no economic recession.
Where we are?
The European Central Bank’s May forecast was for an annual decline in EU GDP of 8.7% for all of 2020 and a recovery only in 2022.
The average result for the community for the second quarter, which should be the worst for this year, is an economic collapse of 14.1%, and for the eurozone countries even 15%.
Bulgaria is far from being the member state with the worst indicators, on the contrary. With data still missing for 7 countries, the decrease in Bulgarian GDP places us in fifth place in the community. It is lowest in Finland, Poland, Sweden and Lithuania.
A record in the negative direction in this regard is Spain, where statistics show a decrease of 22.1%, followed by France with 19%, Italy with 17.3%, Portugal with 16.3% and Belgium with a 14.5%.
In all of these countries, the annual decline in GDP in the second quarter is just an even stronger confirmation of a trend that started earlier. Because in all of them and in the first quarter declines were reported, although much smaller. Bulgaria is one of the ten member states in which there was still economic growth in the first quarter of 2020.
Where the decline
he is bigger
Of course, not all economic activities are seriously affected. An expected real decrease in value added of almost 18% is reported in services that were severely limited during the state of emergency: commerce, restaurants, hotels, transportation. About 2/3 of the lost jobs are also concentrated in them.
However, the industry’s overall decline is less than 3%, and extractive companies, which are part of the heavy manufacturing and energy industries, partially offset the collapse of export-oriented industries.
At the beginning of the state of emergency, many European and global automakers temporarily closed their businesses as car sales fell sharply and they accumulated many unsold products in stock.
This had a severe impact on a well-developed industry in Bulgaria of auto parts and component suppliers, which already account for around 8% of Bulgarian GDP.
In our country, auto parts manufacturers were among the first to take advantage of the 60/40 measure to preserve employment and despite the losses suffered in May and June they were ready to reopen their plants.
Construction is also one of the activities that
as if they weren’t
He felt
the current crisis,
display NSI data. In the second quarter of 2020, GDP, demanded by the construction sector in Bulgaria, grew by 1.2% annually. For him, the crisis is expressed in the fact that growth is simply too small compared to that of the first quarter, which was 3.7%. Furthermore, at the beginning of the state of emergency, public construction contracts were blocked for some time due to negligence in the adoption of emergency legislation. The texts of the special laws allowed the possibility of extending the review periods for appeals against administrative acts to be interpreted as an opportunity for an indefinite extension of public procurement procedures, but after protests from the industry, the process was unblocked.
Particular attention should be paid to sectors that, in the context of the general decline, achieved in the second quarter
to produce
more output
In the first place, it is the sector for the creation and dissemination of information and creative products together with telecommunications, where GDP growth of 3.8% per year is reported.
In second place are financial and insurance activities, which registered growth of 2.6%, as well as research and administrative activities, which registered GDP growth of 1.9 and 1.3%, respectively.
The creation and dissemination of information and creative products and telecommunications include sectors such as information technology, messaging services, etc., which not only did not suffer from the coronary crisis, but also received incentives to grow.
The boom in online commerce and the need for companies to minimize physical contact with their employees has led to a boom in messaging services and this is evident in their turnover for 2020. In the first quarter they increased by 12.5% year-on-year, and in the second – by 21.6%.
The IT business cannot complain either, but it is noteworthy that the growth rate of turnover is decreasing: in the first quarter its growth was 21.3% per year, while in the second quarter it was only 5.7 %.
There are several other companies in the service field, which have been affected by the coronary crisis rather than seriously: cleaning activities, security and investigation and administrative activities at the service of the company, according to data from NSI. They also increased their turnover in the second quarter, although very little.
In the fields of public administration, education and health, as well as in scientific activities, there was no decrease. The growth is small: 1.3 and 1.9%, respectively, compared to the previous year. Such a move is logical, as the budget funding they depend on has not stopped, wages have not been cut, and no cuts have been made.
However, the same cannot be said for culture and sports, as well as for the entertainment and leisure industry. There
indicators
they have deteriorated
a lot exactly
In a second
trimester
in 2020
According to INE data on gross domestic product for the second quarter, the decrease in value added in commerce, restaurants, hotels and transport was 17.7% per year.
More details by industry can be seen in the NSI data on billing. Air transport in Bulgaria, for example, in the second quarter decreased its activity by 64.1% compared to the same quarter last year. This collapse is exclusively due to suspended travel, as air travel has been on the rise in recent years. Even in the first quarter, which covers both January and February, there is an increase in annual turnover, albeit a very small one: only 2.2%.
The activity of tour operators and travel agencies
literally
has collapsed
– the decrease is 94.6% per year. Most likely it is due to the fact that at the beginning of the pandemic, people began to cancel planned and even paid vacations and trips and demand that their money be returned.
Advertising and marketing activities, on the other hand, also reduced their turnover quite significantly in the second quarter, by 30.4% annually.
Although much less, the billing of a whole range of professional services for companies or individuals is decreasing: legal services, accounting, tax consulting, architectural and engineering services, human resources consulting, etc. However, its turnover is decreasing by almost the same percentages that it increased in 2019.
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