BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 7 - 14 MARCH 2008 )
Sections/headline briefs:
MACROECONOMY:
· Bulgaria with BGN 16,400 M foreign trade deficit for 2007
· Bulgaria CPI growth falls to 1,1% m/m in February
· Bulgargaz eyes record hike in domestic gas prices
· President Purvanov: "Bulgaria ready to buy about 1,000 Mln cubic meters natural gas from Azerbaijan"
· Electricity prices on the Balkans doubled after closing NPP Kozlodui
· 2000 russian workers to join NPP Belene construction
· Belgium Electrabel and German RWE are main rivals for NPP Belene
· One billion euro annually for road infrastructure in Bulgaria
· Bulgarians assemble BMW in the Czech Republic
· New car sales rise 27.8% y/y in Jan-Feb
· Bulgaria allocates CO2 permits by end of March
· EU grants �80 M for fishery operational program
· Bulgarian drug market grows 11.8% in 2007, seen expanding up to 9% in 2008
· Bulgaria presented as gambling destination on CNN
· Plovdiv airport needs to attract low-cost carriers
INVESTMENTS:
· UK remains biggest investor in Bulgarian economy
· FDI in Bulgaria seen at up to 15%/GDP in 2008 - 2010
· Drop in FDI in local building sector foreseen
· Colliers sees more investments in real estate in Bulgaria, Croatia, Romania, Serbia in 2008
· Spain's Catalonia Real Estate enters Bulgaria with �7 M project
· US, Bulgaria's energy ministers consider US investments in nuke energy
· Wind park to be built in north-eastern Bulgaria
· Canadian 'Dundee' invests in Bulgarian gold mine
· Marma co investing in Varna gated community
· BLD to build new residential area near Sofia
- Bulgaria disadvantaged in race with Romania for massive Austrian investment
· Belgian company seeks spot in Bulgaria to invest � 100 M
· GreenFuel to decide on Bulgarian bio-fuel plant in two months
· Norwegians invest in housing estate in Dupnica town near Sofia
· Bulgaria must invest �500 M annually for EU energy aims
COMPANIES:
· 700 companies to take part in Bulgaria Building Week
· US companies to lobby for NPP's units 3, 4
· 30 Bulgarian companies take part at MIPIM in France
· The net sales of public companies make up 21% of Bulgaria's GDP
· Bulgarian businessmen build yachts for Baku gas tycoons
· German retailer Lidl picks site for first Bulgarian store
· Retail chain C&A to enter Bulgaria in 2010
· Kremikovtzi to become Ukrainian soon
ANALYSIS:
· Analysts find it possible that Bulgaria will begin to sink into recession
· U.S. Report: Corruption in Bulgaria goes unpunished
· Inflation wave hits pockets, policy in East Europe
· Domestic consumption, investments help Bulgaria's economy grow 5.7%-6.0% in 2007
Articles:
MACROECONOMY:
Bulgaria with BGN 16,400 M foreign trade deficit for 2007
Bulgaria's foreign trade deficit (export FOB - import CIF) for the January-December 2007 period amounted to 16,400 million leva, according to preliminary data released by the National Statistical Institute on Monday. The deficit amounts to 14,400 million leva at FOB/FOB prices.All months of 2007 registered a deficit in trade, the highest deficit being for December (1,800 million leva/exports FOB - imports CIF) and respectively 1,600 million leva at FOB/FOB prices.Foreign trade for the same period amounted to 69,100 million leva - a 15.9 per cent rise year-on-year - with a preserved trend of annual growth.Goods worth 26,400 million leva (a 12.2 per cent increase compared to 2006) were exported in 2007. Imports at CIF prices amounted to 42,800 million leva (an 18.4 per cent rise year-on-year), the value of imported goods exceeding the imported ones by 62.1 per cent.More than half of the country's trade is with the EU - 59.3 per cent. More than 60 per cent of the goods exported by Bulgaria are intended for the Community while imported goods account for 58.5 per cent of the total import. Compared to 2006, exports to the EU have increased by 12.1 per cent and imports - by 23.2 per cent. Germany, Italy and Greece are Bulgaria's main trade partners from the EU. The National Statistical Institute reported a 49 per cent year-on-year increase foreign trade deficit with the EU (exceeding 9,000 million leva).Compared to 2006 trade with third countries marked a 12.3 per cent increase. Trade with CIS countries are revealed a trend of growth, exports increasing by 83.9 per cent and imports - by 6.9 per cent, generating a trade deficit of 7,000 million leva.Bulgaria's 2007 exports for neighbouring countries increased in comparison to the previous year: by 11.3 per cent for Turkey, by 30.3 for Romania, 9.2 per cent for Macedonia, 29.6 per cent for Serbia, 13.8 per cent for Greece. Imports from Macedonia have increased more than twofold, by 16.5 per cent - for Greece, by 3.3 per cent - for Serbia, by 19.9 per cent - for Romania and by 32.4 per cent - for Turkey.Bulgaria's trade with OECD countries showed a trend to increase (by 20.4 per cent), the largest share of exports being with Turkey - 3,030 million leva and imports standing at 2,936 million leva.
Bulgaria CPI growth falls to 1,1% m/m in February
Consumer prices in Bulgaria rose by 1,1% in February month-upon-month after increasing by 1,4% in January, data from the country's statistics board NSI showed on Wednesday. Bulgaria's year-on-year inflation stood at 13,2% at the end of February. Food prices once again led the charge but slowed to a monthly 1,7% in February, compared to 2,1% during the previous month. Prices in the health care sector sped up by 2,7% and those in the transport sector rose by 0,9%, while prices of clothes and shoes went down by 0,5% in February compared to the previous month.
Bulgargaz eyes record hike in domestic gas prices
Bulgargaz, the state-controlled gas distributor, has asked the nation's power regulator to approve a 32.07% increase in domestic gas prices to 482.18 levs per 1,000 cu m without taxes from April 1. The State Energy and Water Regulatory Commission is expected to review the proposal next week and organise a public discussion with interested parties. The increase of 117.18 levs over the current price per 1,000 cu m is due to the Q1 price approved by the regulator which was lower than the hike requested by Bulgargaz as well as to the higher price of alternative fuels and petrol, said the gas distributor. The domestic gas price is pegged to that of fuel oil and oil and the U.S. dollar exchange rate. In December 2007, Bulgargaz proposed a 25.4% price adjustment in Q1 2008 but the regulator okayed an increase of only a 9.87%. Changes to the long-term gas delivery agreement with Russia's Gazprom that took effect in April 2007 envisage Bulgarian gas prices to level off with the market by 2012. The latest Bulgargaz proposal is unlikely to be approved, said sources from the SEWRC.
President Purvanov: "Bulgaria ready to buy about 1,000 Mln cubic meters natural gas from Azerbaijan"
Bulgaria is ready to buy about 1,000 million cu m of natural gas from Azerbaijan very soon, President Georgi Purvanov said Monday, emerging from a meeting with his Azeri counterpart Ilham Aliyev. Purvanov is paying a working visit to Azerbaijan.This quantity of gas is Bulgaria's quota under the EU priority NABUCCO project, which has to transport gas from the Caspian region to Europe. These supplies can reach Bulgaria by connecting the Bulgarian gas network with the Turkey-Greece gas pipeline, Purvanov pointed out. Bulgaria already has a project for a branch to our country, to which end a gas pipeline from Haskovo (Southern Bulgaria) to Komotini (Greece) has to be built."As committed to the energy security of Europe Bulgaria is here with the message to boost work on the European NABUCCO project," the Bulgarian President said before his Azeri counterpart and underscored that Azerbaijan could have a principal role of supplier of a considerable part of the natural gas for the project.Purvanov suggested that the experts, competent ministers and energy companies from the two countries discuss the opportunities for active inclusion of Azerbaijan in the implementation of some of the European energy projects, including the Bourgas-Alexandroupolis oil pipeline. He also declared Bulgaria's readiness to participate in the survey, extraction and transportation of natural gas from Azerbaijan.President Aliyev agreed to the idea of President Purvanov on the holding of an interregional conference at which the countries of the Balkan, Black Sea and Caspian regions will explore opportunities for energy diversification.The two heads of state commented on the launch of a direct air service between Sofia and Baku. "This time we are categorical that a direct service must be in place by the autumn of 2008. It can combine Sofia and some other Balkan capital as a destination," Purvanov said.Regarding the conflict between Azerbaijan and Armenia on the status of Nagorno-Karabakh, President Purvanov confirmed Bulgaria's position in support of the efforts of the OSCE Minski Group.Aliyev stressed his country's position that the EU Member States must clearly and openly issue a message that Nagorno-Karabakh will never be independent and that no country will recognize its independence.Asked about Kosovo, Purvanov attached paramount importance to the EU position that the Kosovo case is sui generis and does not set a precedent for another similar situation in any part of Europe or nearby areas.This is Purvanov's second visit to Azerbaijan after his official visit in October 2004. His Azeri counterpart Aliyev paid an official visit to Bulgaria in September 2005.The delegation, accompanying the Bulgarian President, will include Minister of Regional Development and Public Works Asen Gagaouzov, National Assembly Agriculture and Forests Committee Chairman Vassil Kalinov, Deputy Foreign Minister Evgenia Koldanova and others.
Electricity prices on the Balkans doubled after closing NPP 'Kozlodui'
Bulgaria doesn't suffer from electricity energy deficit, but after closing of 3rd and 4thunits of NPP ‘Kozlodui' the other Balkans countries are already suffering from such and the electricity prices had raised double. That was announced by Bulgarian Energy Minister Peter Dimitrov on International Conference about Renewing Energy Resources in USA. In Dimitrov' words some countries, as Albania for example, already have regime of energy supplying. Bulgarian Minister pointed out, all around Europe there are nuclear reactors of the same type, which are exploited and presently still working.The Energy Secretary of USA Samuel Bodman commented he would bring up the question before European Commission, but Bulgaria itself has to continue the active reviews in this direction. Dimitrov and Bodman expressed the common statement, EU and USA have to take active participation in the production of energy of renewing energy resources.
2000 russian workers to join NPP 'Belene' construction
General Consul of Russia in Rousse and Belene Municipality discuss over the opportunities of providing home for 2000 Russian workers and specialists, which will be employed about the construction of NPP ‘Belene', money.bg announced. 4000 people will be needed for the building of the plant, as the half of them will be assured from Russia, because Bulgaria does not have enough specialists for construction of such facilities, says Genadiy Rostovski, chairman of Russian Chambers of Trade and Industry's agency for the Balkans. According to Rostovski, another round 1500 work positions will be opened for the construction of ‘Bourgas - Alexandroupolis' oil pipeline. The needed work force amount for the building of gas pipeline ‘South Stream' is still in a process of preparation. Almost finished is another intergovernmental project between Bulgaria and Russia - the ferryboat connection Varna - Caucasus, which will maintain load turnover not only between Bulgaria and Russia, but also between whole Asia and Western Europe.
Belgium Electrabel and German RWE are main rivals for NPP Belene
The leadership of National Electricity Company (NEC) approved the companies Electrabel (Belgium) and RWE Power(Germany) as candidates who presented best conditions. The candidates continue negitiating in phase 2 of the procedure ‘Invitation for applying of interest for strategic investor on the project NPP Belene. The companies that presented their first offers are Electrabel, CEZ, E.ON, ENEL and RWE Power.
One billion euro annually for road infrastructure in Bulgaria
Bulgaria needs 10 billion euro for road and railroad infrastructure construction and maintenance till 2015 to level up with the EU road standards, reads a report by Bulgaria's Ministry of Transport presented at a conference in Sofia. The annual funds for construction and rehabilitation of roads have to amount to 1.312 billion euro, according to investor.bg. If Bulgaria spends less than a billion euro a year it would not be able to keep up pace. These ten billion include the funds for the Transport Operational programme - a little over two billion euro as well as funds for public-private partnership projects. In 2007 a total of 350 million euro were spent on roads in Bulgaria.
Bulgarians assemble BMW in the Czech Republic
In the last two years Bulgarians have been among the most sought for workers in the Czech Republic. In 2008 alone "Trenkvalzer" company will recruit 2000 Bulgarians who will leave for Prague. Most of them will be employed at the German automobile plants, situated in different Czech towns. The salary of these workers is 500 euro and they have free accommodation. No special qualification is required and they will work at the assembly lines of BMW, Volkswagen and other companies. The starting salary for engineers is 1000 euro. The employer provides accommodation and insurance to all workers. There is a great demand for TIR drivers. The salary for this position is also 1000 euro. Companies of the Czech Republic and Slovakia are looking for seamstresses. The payment is 450 euro. They will work at the outsourced factories of famous European fashion houses.
New car sales rise 27.8% y/y in Jan-Feb
A total of 9,290 new vehicles were sold in Bulgaria in the first two months of 2008 (the data comprises automobile, motorcycle, bus and truck sales), the monthly data of the Union of the Importers of Automobiles in Bulgaria (UIAB) show. Opel was the best selling automobile make in Bulgaria in January and February 2008 with 1,009 units sold. The figure accounted for 11.73% of the market. Toyota occupied 10.63% of the market with 915 vehicles sold. Ford and Volkswagen accounted for 794 and 759 units, respectively, of the 8,605 automobiles sold in the country during the first two months of the year. Peugeot (7.82% of the market), Dacia (6.45%) and Citroen (5.64%) were also among the best selling automobile makes in the period . A total of 35 motorcycles were purchased in Bulgaria in the first two months of 2008. Peugeot and Yamaha sold 22 and 9 units, respectively. Iveco was the leader in terms of bus and truck sales. A total of 279 units of the brand were sold in the period, making for 40.73% of the market. Mercedes ranked second with 183 units sold and 26.72% market share. Isuzu was the third best selling bus and truck make with 7.74% of the market. The sales growth of transport vehicles slowed down to 27.8% y/y in Jan-Feb as compared to 32% y/y in January but is still above the 22.2% increase from last year, according to data presented by the local association of automobile importers.
Bulgaria allocates CO2 permits by end of March
Bulgarian government is expected to allocate to industry permits to emit 42.3 million tonnes of annual carbon dioxide for 2007 and 2008 by March 27, the Environment Ministry official announced on Monday, told from Reuters. By that time the state will submit the necessary information to the EC regarding allocations to get a final approval and launch trading by the end of April. This was informed by Stefan Bishovski, head of the Climate Change department at the Environment Ministry, in front of Reuters.Launching trade by end-April is very important so that businesses can meet a deadline to register their 2007 emissions, Bishovski explained.The EU's carbon trading scheme is the 27 nation bloc's main strategy to fight climate change, and sets an overall cap on permits to emit the greenhouse gas carbon dioxide (CO2) to energy-intensive industry, but allows companies to trade these EU Allowances (EUAs) among themselves. Last December , Bulgaria became the 8th post-communist east European country to take legal action against the EU executive Commission, after Brussels slashed Sofia's original 2008-2012 CO2 annual emission quota by 37% to 42.3 million tonnes, informed from the media.The East European countries have argued lower CO2 emissions would hurt the robust growth of their emerging economies. A deadline expired on February 28 for EU countries to allocate permits to their industries in 2008, the first year of the second round of the CO2 trading scheme.Only Austria and Denmark had met the deadline.
EU grants �80 M for fishery operational program
Fishery Operational Program has been launched with priority two – aquaculture production investments, Bulgaria’s Deputy Minister for Agriculture and Food Supply Byurhan Abazov and Head of Directorate-General Fishery and Maritime Affairs Stephanos Samaras announced at a press conference, quoted by Focus News Agency. The EU funding under the operational program is EUR 80 million, while the national co-funding is about EUR 30 million. The committee for monitoring the implementation of the operational program held its first session on Wednesday. Stephanos Samaras said the capacity of the institution that will implement the program should be strengthened. In this case this is the National Agency for Fisheries and Aquaculture.
Bulgarian drug market grows 11.8% in 2007, seen expanding up to 9% in '08
Bulgaria's drug market grew by 11.8% in value in 2007 driven by a 12.5% rise in sales in pharmacies, and is seen expanding by up to 9.0% this year, data of global healthcare information company IMS Health showed on Wednesday. The Bulgarian drug market reached 1.43 billion levs ($1.13 billion/731 million euro) in 2007, of which 1.2 billion levs came from sales in pharmacies, IMS Health said in a report. Sales volume rose by 8.0% to 243.8 million packages. Growth in 2007 was stronger than the 8.0% forecast given by IMS Health earlier. The information company expects the Bulgarian market to add 7.0% to 9.0% in value in 2008 as the number of packages sold is seen at 260 million next year, it said in the report. There were about 4,140 pharmacies in Bulgaria at the end of 2007, down by 160 from end-2006. Bulgaria has a population of 7.7 million people. Sales of non-prescription, or over-the-counter (OTC), medicines grew by 19.3% in value in 2007 to 308 million levs as 103 million packages were sold, up 8.5%. The OTC market is expected to expand by 20% in 2008, IMS Health added.
Bulgaria presented as gambling destination on CNN
Bulgarian State Agency of Tourism (SAT) starts a campaign, advertising Bulgaria as tourism destination on biggest world TV channels.In the next 2 months CNN channel will show advertising clip, presenting Bulgaria as a gambling destination. Casinos and overfilled Black Sea beaches will attract more foreign tourists.The campaign, which has the purpose to ‘advertise Bulgarian tourism', consist of three short clips. The other two clips show parts of Bulgarian natural and cultural treasures.The whole campaign costs 240,000 EUR. Massive advertising campaign of Bulgaria starts also on another big TV channel - Euronews on March 11.
Plovdiv airport needs to attract low-cost carriers
Plovdiv airport needed more flights from low-cost carriers in order to develop and progress, government officials and experts said at a round table discussion on March 12 2008. Bulgaria's fairly small air travel market, the relatively low purchasing power of its population and Plovdiv's close proximity to Sofia airport, used by all major air companies were singled out as the main obstacles in the way of its development. The discussion was organised by the management of Plovdiv airport to debate the prospects of launching regular flights from and to the airport, Transport Ministry officials said, as quoted by Focus news agency. The airport is now used primarily for cargo flights and as a backup destination for flights to Sofia, especially in winter months when fog makes the airport in the Bulgarian capital virtually unusable. Representatives of Plovdiv airport commented the hardest thing to do would be to attract the first low-cost carrier. Later, when the destination developed, others would come by themselves, they said. “Bulgaria has six international airports and it is important that we work to modernise all of them,” Transport and Communications Ministers Petar Moutafchiev, who also attended the meeting, said, as reported by Focus. According to Moutafchiev, the modernisation of Sofia airport had begun with the opening of the new terminal, and of Varna and Bourgas airports – with them being given on concession. The Rousse and Gorna Oryahovitsa airports would also be given on concession. Plovdiv airport would be modernised with Government funding, but public-private partnership through a joint company to bring in more funds could also be sought, Moutafchiev said. This would happen with the amendments in the law on concessions, which would regulate the so-called joint companies, he added.
INVESTMENTS:
UK remains biggest investor in Bulgarian economy
The UK has topped the list of the biggest investors in the Bulgarian economy for a second year in a row, shows data of the central bank. British foreign direct investment in Bulgaria rose 23% year-on-year to 901.5 mln euro, accounting for 16% of total FDI inflows. The UK earns the title thanks to the significant investment that Brits are making on the Bulgarian property market. Going forward, British investors do not seem poised for a threepeat in 2008. Local realtors are saying demand for resort properties among British home buyers is reaching a standstill. The biggest share of FDI last year was absorbed by real estate, property rentals and business services, at 37%. In nominal terms, the FDI in this sector jumped 41% year-on-year to 2.158 mln euro in 2007. Belgium and Luxembourg posted a whopping 446% increase in FDI in the Bulgarian economy to 716 mln euro last year. The surge was mainly due to the 295 mln euro acquisition of Bulgaria's EIBank by Belgian KBC which it followed up with the 185 mln euro buy of local insurer DZI. Further down the list of the nations with the biggest FDI contribution to the Bulgarian economy in 2007 are the Netherlands with 542 mln euro, Austria with 475.1 mln, Greece with 408 mln, Spain with 314 mln and Cyprus with 198 mln euro. Bulgaria's financial intermediation industry attracted 1.741 bln euro in FDI last year, up a hefty 137% year-on-year increase. Total FDI for 2007 rose 30.3% to a record high of 5.687 bln euro.
FDI in Bulgaria seen at up to 15%/GDP in 2008 - 2010
Foreign direct investments (FDI) in Bulgaria are expected to account for up to 15% of the country's gross domestic product (GDP) in the 2008-2010 period, Finance Minister Plamen Oresharski said on Monday. In the period 2008-2010 the average yearly share of FDI in the GDP is expected to be about 12-15%," Oresharski said in a presentation published on the Finance Ministry's website. FDI was 20% of GDP, or 6.0 billion euro ($9.3 billion) in 2007, the finance ministry said in a statement. Oresharski in February said FDI in Bulgaria are likely to decrease slowly in the medium term which could help reduce the country's ballooning current account deficit. Bulgaria's current account deficit widened to 21.6% of the country's GDP last year from 15.7% in 2006 mainly due to rising trade deficit. The government expects the current account gap to swell to 21.9% of the projected GDP this year. GDP is projected to grow by a real 6.4% this year, compared to an estimated rise of 6.4% last year and 6.1% in 2006.
Drop in FDI in local building sector foreseen
Foreign investments in the sphere of real estates and construction will decrease, the chairman of Bulgarian Chamber of Commerce Bojidar Danev prognosticates. A panting of local property market exists already, he said. According the Chamber's data there are 20,000 unsold apartments, and on the seaside the number is 200,000.For those apartments exist obligations and if they are nit sold we may expect series of bankrupts.Danev also commented that speculative trade with real estates hides actual threat for the state's economy.For avoiding the building collapse the Chamber's chairperson suggested to be made an attempt for the business to go ‘on the daylight'.Equalization of tax values with the market ones and parallel decrease of the tax stake, analysis of the financial streams in the bank sectors and comparing of the reported quantities of invested materials with paid delivery notes are among the measures suggested by Bulgarian Chamber of Commerce.
Colliers sees more investments in real estate in Bulgaria, Croatia, Romania, Serbia in 2008
Southeast European countries Bulgaria, Croatia, Romania and Serbia are expected to see higher investment in their property markets in 2008 than in the previous year, real estate consultants Colliers International said. As a relatively small market with a few large investment properties, Bulgaria has been relativley unaffected by the credit crunch," Colliers said in its Investment Market Overview for Europe, the Middle East and Africa (EMEA), published on its website. Bulgaria's investment market was facing a shortage of operational investment product, and as a result most of the transactions were forward purchases of properties under development. Some investors, however, were also providing development financing, the report said. Properties that have already been transacted were expected to be held in anticipation of further yield compression, it added. Earlier this year, Bulgaria's unit of Italian banking group UniCredit said yields on investments in the country's real estate market will drop by 2010 from their last year's levels of 7.5% for office buildings, 8.5% for trading centres and 9.0% for logistics projects. In Croatia, while the development market was strong, led by cash-rich local players, overall investment along the coastline had slowed, Colliers said. Active were domestic as well as Israeli, German, Austrian and Italian investors; however, there were a limited number of institutional investors due to lack of transparency and small size of the Croatian market. The investors who are present are most interested in retail projects in cities over 100,000 people, as well as offices in Zagreb," the report said. It expected yield compression and an increase in the quality of supply. The Romanian market was still in the early days of development and Colliers expected it to sustain the interest of international investors on strong market dynamics. While yields on prime properties have continued to decline, yields on secondary and tertiary properties have increased," the report said. In Romania, which joined the European Union together with Bulgaria in January last year, 2007 yields on investments were 6.5% for office buildings, 7.5% for trading centres and 8.0% for logistics projects, UniCredit's analysis showed. In Serbia, domestic investors had been most active in the residential and retail segments, while international investors have been involved in several large office projects. Intense development and increasing investments in the industrial sector are expected in 2008, with the most interesting locations along the E-70 and E-75 highways," the report said.
Spain's Catalonia Real Estate enters Bulgaria with �7 M project
Spanish real estate developer Catalonia Real Estate has entered Bulgaria with a 7.0 million euro ($10.7 million) project near the country's popular ski resort of Pamporovo, a company official said on Tuesday. We are building a holiday village of six buildings with a total of 180 apartments on a land of nearly 9,000 square metres," company manager in Bulgaria, Iliana Martinez, told SeeNews. The compound, some four kilometres from the ski resort Pamporovo in the Rhodope Mountains in south Bulgaria, is expected to be completed by the end of 2008. This or next year Catalonia Real Estate plans to launch the construction of a second holiday village on some 15,000 square metres of land it has bought near the first compound, Martinez said. That project will be bigger," she added without elaborating. Catalonia Real Estate is part of Spanish group Inverta, which is active in real estate residential and commercial sectors in Europe, the USA and Africa. The real estate market in Bulgaria has thrived in the recent years with domestic and foreign investors expecting high yields after the country's accession to the European Union in January 2007.
US, Bulgaria's energy ministers consider US investments in nuke energy
US Secretary of Energy Samuel W. Bodman will encourage Westinghouse and General Electric, both US companies active in the nuclear energy sector, to screen opportunities for investments in units three and four of the Kozloduy nuclear power plan, according to a statement released by the Bulgarian Economy and Energy Ministry in the wake of economy minister Petar Dimitrov's meeting with Bodman.In the same statement, Dimitrov said that as a result of units three and four being shut down, despite similar facilities still operating in Europe, it was not Bulgaria but the Balkans - and Albania in particular - that suffered a shortage of electricity. Albania has seen its electricity prices doubling over the past year, Dimitrov said.Bodman said he might raise the issue of re-connecting the two reactors with the European Commission, but he urged Bulgaria to itself be pro-active. He also committed to brief the US nuclear companies on the potential to invest in reactors three and four despite the EC's firm stance that Bulgaria should heed its EU Accession Treaty commitments and not re-start the two 440MW reactors.In mid-January 2008, Bulgaria announced it was in talks on leasing the two 440MW units to the Canadian Bruce Power and UK company BNFL in return for lobbying to get the reactors working again. Sofia expected Bruce Power representatives for concrete talks, but after Brussels scolded Sofia for speaking up on an already closed EC topic, the visit never took place.Dimitrov and Bodman also discussed the Nabucco gas pipeline, expected to move crude from the Caspian region, Iran and Egypt to Western Europe to Turkey, Bulgaria, Romania, Hungary and Austria.Dimitrov reiterated that Bulgaria regarded Nabucco a top priority project because it represented an alternative source of natural gas, the statement of the Ministry of Economy and Energy reads. Dimitrov has briefed on plans of the Bulgarian President Georgi Purvanov to discuss gas supplies with Azerbaijan, as part of a strategy to court crude-rich countries in the Caspian region.
Wind park to be built in north-eastern Bulgaria
A wind park for electricity production will be constructed near Sokolovo village, North - Eastern Bulgaria. ‘Wind park Dobrudja 2 previews the installation of 18 wind turbines, 2.5 megawatts power each. Their height will be 100 meters and the rotor's diameter 90 meters. The wind generators will be located over 20 decares land with changed statute.The territory, object of the investment proposal, doesn't enter the ecological net of prevention ‘NATURA 2000' and won't affect the protected and vulnerable zones, the biological diversity and the ecosystems, the investors consider.The upper soil layer, rich of humus, will be preserved and restored after the construction works end.
Canadian 'Dundee' invests in Bulgarian gold mine
Bulgarian state and Canadian mining company 'Dundee Precious Metals' agreed to establish a common concession about ‘Chelopech' gold mine exploitation and a public -private partnership for the construction and exploitation of new modern hydro metallurgic installation for production of gold and copper. Bulgarian state will hold 25% of the shares, as the dividends of Bulgarian state will be passed directly to the pension system. That's how, the so called, Silver Fund of Bulgaria will be filled with 700 million in the next 10 years.Dundee guarantees investment of over 155 million USD.Bulgarian Premier pointed out, Bulgaria will make anything possible to realize the investment and that the state insists the project's realization to happen in full correspondence with all standards for environment protection.
Marma co investing in Varna gated community
Local company Marma has launched the construction of a 40 mln euro gated residential complex in Varna, on the Black Sea. The New Varna community, located in the Galata district of the coastal city, will have a footprint of 73,975 sq m. The project funding is provided by the Bulgarian American Credit Bank. The first phase of the project is the Varna Mirror development comprising 17 luxury family houses with an area of 6,200 sq m each. Varna Mirror 2, also part of the first phase, should get the necessary building permission by the end of March, said Marma owner Metodi Metodiev. Varna Mirror 2 will feature four apartment buildings with a total of 135 units and a build area of 38,785 sq m. The Varna Mirror phase should be completed by 2010. The second phase, Anenko City, should be delivered in 2011. It will consist of eight apartment buildings with a total of 275 units. No pricing information is currently available. The New Varna community will have a shopping center, restaurant, coffee bar, spa and gym.
BLD to build new residential area near Sofia
BLD investment fund plans to build a new residential complex on a 6-hectare plot near Sofia. The company has already purchased 3.815 ha, or slightly more than half the area planned. The price paid for the land is EUR 1.7 million.The purchase of the land is the first of several deals for neighbouring plots to be concluded by the company, Dimitar Savov, executive director of BLD, said. The aim is to consolidate a large land plot of 6 ha in the region, which the investor says has solid potential for development. The deal will be financed with own funds. The investors do not specify where exactly the new residential area will be located in order to avoid speculations in the land purchase negotiations. Dimitar Savov said that he expects the new residential complex to be attractive for Sofia residents, keeping in mind that buyers increasingly prefer suburban areas to the city centre. The new residential area has potential to offer a better standard of living, Savov said.The purchase is part of BLD's strategy of diversifying its real estate portfolio. The other forthcoming deal of the fund, which is listed on the London Stock Exchange, is for a business property in Sofia. If those deals are concluded, the company will have invested all its capital about a year after it raised an additional GBP 15 million in London. BLD has a portfolio of nine projects in resort areas, as well as in buildings in Sofia. Their expected value upon completion is EUR 241 million. BLD posted a pre-tax loss of GBP 187,000 for last year, while in 2006, it reached GBP 1.03 million.
Bulgaria disadvantaged in race with Romania for massive Austrian investment
Bulgaria is reportedly in a disadvantaged position in its competition with Romania to attract the EUR 7 billion-investment that Austria's steel-maker Voelstahlpine is planning to make in the Black Sea region. This becomes clear from an article of the Austrian newspaper Der Standart outlining the advantages and disadvantages of the main players in the scramble to get the huge steel factory, for which Voelstahlpine has not chosen a country yet. Der Standart reports that while the Ukriane and Turkey are also in the race, the main competition is between Bulgaria and Romania, and it is rather emotional. According to the Austrian paper, Bulgaria is trying to attract the investor by offering cheap electricity, whereas Romania's trump cards are its infrastructure and its fast-growing auto industry, which needs steel products. Der Standart quotes diplomats from Bucharest, who said that Sofia had been trying to get the steel mill investment at any price, and persons close to the Voelstahlpine management, who believe the Bulgarians were "the most aggressive" in the competition. The speaker of Voelstahlpine, however, is quoted as saying that electricity was not as important for the Austrian concern as the logistics, infrastructure, and the supplies of raw materials. In addition, last week the Austrian chancellor and the Romanian PM signed an agreement for the construction of a sea way on the Danube. Voelstahlpine is expected to choose the location for its investment in the summer.
Belgian company seeks spot in Bulgaria to invest � 100 M
The Belgian company Etex Group is ready to invest more than EUR 100 B in a construction materials factory in Bulgaria, the Bulgarian private Darik Radio reported.
The company representatives are going to arrive to Bulgaria at the beginning of next week in order to look for a suitable spot for their planned investment. The Belgian investors require that the plot for the future factory be about 150 decares, and that it have access to the gas supply network. Etex Group intends to start with an investment in a storage facility for construction materials worth EUR 20 M. At a later stage, it plans to construct a factory for about EUR 100 M. During their visit, the company representatives are going to look at 10 different plots in ten cities around Bulgaria including Varna, Veliko Tarnovo, Vidin, Plovdiv, Gorna Oryahovica, and Sevlievo. The Belgian Etex Group specializes in manufacturing and marketing of construction materials. It has 90 subsidiaries in 41 countries, and employs 12 500 people.
GreenFuel to decide on Bulgarian bio-fuel plant in two months
Spanish GreenFuel Corporation would decide within two months whether to build a bio-fuel plant in the region of Pleven, northern Bulgaria, expert.bg reported on March 12.The decision will be discussed at the company's shareholders meeting in May 2008, Greenfuel's technical director Antonio Jose Huertas Moreno said, as quoted by expert.bg.Moreno and Pleven regional governor Tsvetko Tsvetkov arranged a working meeting to discuss the future investment's parameters and the production process itself.The Spanish company might apply for first class investment certificate, which means it will invest at least 70 million leva and would allow it to acquire plots for the plant's construction without attending a tender procedure.GreenFuel Corporation has been negotiating for the construction of a plant for bio-diesel and bio-ethanol production and a new refinery for more than a year now. The plant will be located in the region of Pleven, Gulyantsi, Knezha or Dolna Mitropolia. It could use the Danube River port of Somovit to deliver raw materials and ship end products.The project envisions plant capacity of 110 000 tons of bio-diesel and 60 million tons of bio-ethanol annually. The raw material needed for production on such a scale is at least 250 000 tons of vegetable oil-rich crops for bio-diesel and 100 000 tons of grain for bio-ethanol.
Norwegians invest in housing estate in Dupnica town near Sofia
Norwegian investment fund will put 8 million EUR in construction of housing area on the site on former barracks, already useless, in Dupnica town, 80 km from Sofia. With the intentions of building new housing estate area expels the idea of construction big business zone ‘Dupnica - Rila - Kocherinovo'.This project was worked out by the three municipalities and approved for financing by FAR program for the amount of 28,000 EUR.
Bulgaria must invest �500 M annually for EU energy aims
Bulgaria must invest over 1 billion BGN (500 million EUR) annually until 2020 so the purposes set in the EU energy plan, the climate changes and the acts for resumed energy sources could be reached.The sum is almost two times bigger than the fee Bulgaria pays to the Union's budget. In Brussels where the EU meeting of high level takes place, Bulgaria's EU Minister Gergana Gruncharova reported that Bulgaria along with the rest new members would demand the Union to establish a financial instrument that aims to support the new states in getting over the difficulties.The reaching of the purposes will require serious financial resource.Experts estimate the achieving of such amount of investments to 2,16% from GDP.If such financial instrument does not appear, this will place the state in front of serious problems, affecting also the inflation, explained Minister Gruncharova.According to the chairperson of European Commission Jose Barrosso it's already time for emergency acting. There should be common energy market, surely supplies and sustainable energy.All this must be in combination with the contraction measures for climate changes. The deadline, which the European Council sets for entering in force, is the beginning of 2009.The expected result is that till 2020 the emitted from the EU emissions of park gasses to drop with 20% and as well as this much to reach the common part of resumed energy sources.
COMPANIES:
700 companies to take part in Bulgaria Building Week
The eighth edition of Bulgaria Building Week construction fair will take place in Inter Expo Centre in Sofia from March 11 until March 15.This year will feature the highest number of participants ever, 700, or a quarter more than in 2007, Stroitelstvo Gradut weekly reported on March 10.The Bavarian Ministry of Economy, Infrastructure, Transport and Technologies and Bayern International traditionally organise the joint presentation of construction companies from the German province Bavaria. Producers, distributors and retailers of construction materials and technologies from Bulgaria, Turkey, Germany, Italy, UK, Austria, Holland, Finland, Spain and the USA, among others, will take part in the fair.Visitors at the Bulgaria Building Week will have the opportunity to see the latest products and technologies in more than 30 different industry segments.Fair participants will showcase energy-saving design solutions for residential, vacation and industrial developments, insulation technologies for old buildings, construction technologies for special purpose developments - administrative buildings, hospitals, gas stations, supermarkets, tunnels or airports. There will be demonstrations of various construction machinery and equipment, as well.
US companies to lobby for NPP's units 3, 4
Secretary of energy Samuel Bodman has vowed to encourage US companies in the nuclear energy sector like Westinghouse and General Electric to survey the possibilities for investments in Bulgaria, the press office of the Bulgarian ministry of economy and energy said after minister Petar Dimitrov met with his US counterpart in Washington, PARI wrote. Dimitrov is on an official visit to the USA to take part in the Washington International Renewable Energy Conference (WIREC).US companies may show interest in the closed units 3 and 4 of the Kozloduy nuclear power plant (NPP). If the reactors are given to influential concessionaires, they may lobby for their re-opening. Nabucco is a priority project for Bulgaria because it is an alternative source of natural gas, Dimitrov said.
30 Bulgarian companies take part at MIPIM in France
Over 50 representatives of a nearly 30 Bulgarian undertakings will be featured at the most prestigious real estate expo in Cannes, France, opening today. once again the event, dubbed MIPIM, will be a gathering point of over 26, 000 investment funds’ managers, international entrepreneurs, consultants, hoteliers, banks, architecture companies, as well as officials from more than 200 cities and regions from across the globe. Among the local players to partake in the forum are Bulgaria Land Development, CMS Cameron МС Kenna, Colliers International, DGKV, EFG Property Services Sofia, UniCredit Bulgank, etc. The crunch led to an overall deposit insurance revision in the EUBG 135591 2008-03-11 01:10:57 Sofia. Biser Manolov, board chairman of the Bulgarian Deposit Insurance Fund (BDIF) Q: What has been the impact of the global financial markets squeeze on the local bank business in terms of deposit insurance? A: The last financial crisis resulted in a complete revision in deposit insurance across the EU. And yet people should be aware of the fact that there is deposit insurance here that keeps a close watch on people’s assets and will provide for them should a contingency arise. Q: Can we say that we have a well-operating deposit insurance system in Bulgaria? A: Obviously this system is not adequate. The global trends are going towards risk-weighted instalments. Generally the practice of collecting equal payments from all banks is ubiquitous for developing markets and markets with young deposit insurance mechanisms. I believe what we’re now having in Bulgaria is a bit outdated. It is quite reasonable that banks ready to take on greater risks should make instalments that correspond to this risk.
The net sales of public companies make up 21% of Bulgaria's GDP
The companies listed on the Bulgarian Stock Exchange (BSE) have again proved themselves to be the engine of the Bulgarian economy, the Top 50 Public Companies shows. Since the Pari daily started compiling the ranking six years ago, there has not been such mass entry of new companies among the top positions. For a year only the ranking has changed substantially. The net sales income of public companies reached BGN 11.46 billion last year, or 21% of Bulgaria's gross domestic product. Year on year, sales went up by 2%. In 2006, the sales of listed companies amounted to BGN 9.15 billion and made up 19% of GDP. The total profit of public companies in 2007 amounted to BGN 1.35 billion, up by 89% year on year. The nearly two-fold jump was due mainly to Chimimport and Eurohold Bulgaria, which are ranked second and third in Top 50. The top position continues to be held by the most liquid company on the BSE, the Bulgarian Telecommunications Company (BTC), with CEO Bernard Moscheni. Although Kremikovtzi is torn by syphoning scandals, the steel plant tops the ranking, which is made on the basis of sales income as shown in companies' unaudited reports. Kremikovtzi's net sales soared from BGN 815 million at the end of September 2007 to BGN 1.43 billion at the end of the year, or by a total of 75%. The report, however, shows that BGN 418 million of the sales income resulted from the sale of assets.
Bulgarian businessmen build yachts for Baku gas tycoons
Bulgarians will sell yachts to gas and construction tycoons in Azerbaijan. The only concern of the big shots in the country by the Caspian Sea is that they have no marina big enough to shelter their expensive toys. The Dinevs - leading Bulgarian building entrepreneurs from the town of Bourgas - intend to construct a yacht port in Baku. The idea was discussed by businessman Dinko Dinev and Azerbaijani Minister of Economic Development Heydar Babaev.The Bulgarian businessman is on the Bulgarian delegation led by head of the Bulgarian parliamentary foreign policy committee Solomon Passi.
German retailer Lidl picks site for first Bulgarian store
Two years after announcing plans to build a store in the town of Pazardjik, in southern Bulgaria, German discount retailer Lidl has notified the town mayor of its interest in a 1.3 ha land plot, Dnevnik daily reported on March 10.Lidl, part of Schwarz Unternehmensgruppe, wants to build a 1500-sq m supermarket with 85 parking spaces, its first in the country. The company has offered to gentrify at its own expense the immediate vicinity of the proposed store. The investment in the Lidl's project is evaluated at one million euro.The company operates over 7000 stores for food and non-food products in the discount segment in 22 countries in Western and Central Europe. Schwartz is already presented on the Bulgarian market with its hypermarket chain Kaufland.
Retail chain C&A to enter Bulgaria in 2010
Apparel retailer C&A, which manages some 1000 outlets across Europe, is hiring management staff for the launch of operations in Bulgaria, Dnevnik daily reported on March 12, quoting company sources. However, the first local C&A stores are not expected to roll out before 2010, the paper claimed.C&A is one of the largest clothes retailers in Europe, managing outlets in Latin America and China as well. Set up in The Netherlands in 1841, its biggest trademarks include Clockwise, Westbury and Your Sixth Sense. In Central and Eastern Europe the company has outlets in Austria, Czech Republic, Hungary, Poland, Russia, Turkey and Slovenia.C&A is part of the Swiss Cofra Group, which deals with real estate, financial services and renewable energy sources, as well.Several major apparel brands, apart from C&A, have already announced plans to enter the Bulgarian market. The first of their outlets are expected to open for business in 2009, when several new shopping malls are scheduled to be delivered.Rival fast-fashion retailers like Zara and H&M are expected to take out leases in mall properties under development in Sofia and in some of the regional cities. Greek company Marinopoulos recently announced the signing of a franchise agreement for the Bulgarian market with US apparel maker Gap.
Kremikovtzi to become Ukrainian soon
Konstantin Zhevago will seal the deal to purchase Bulgaria’s biggest steel mill Kremikovtzi, the Ukrainian embassy in Sofia told The Sofia Echo on March 11. At the weekend, Ukrainian ambassador to Bulgaria Viktor Kalnik said told reporters that the deal would be done and dusted within a week, as quoted by Standart daily. Negotiations with majority owner, Indian businessman Pramod Mittal, would take place, but the embassy did not give further details. However, the embassy was almost 100 per cent sure that Zhevago will be the new factory owner, culture attaché Vitali Peychev confirmed. “I can not say more because of confidentiality reasons but it will be heard,” Kremikovtzi managing board member and former chief executive Alexander Tomov was quoted as saying by Standart daily. Zhevago was advised by Deutsche Bank, which was also securing the financing for the deal, according to Standart. The figure could run up to one billion US dollars, the daily claimed.
ANALYSIS:
Analysts find it possible that Bulgaria will begin to sink into recession
Publication: BTA
Financial analysts predict that Bulgaria may begin to sink into a recession due to the continuing increase of international oil prices. They expect the depreciation of the US dollar to affect Bulgarian trade in this currency, and predict that inflation in Bulgaria will remain above the EU average, ranging between 7 and 10 per cent. They recognize the fact that labour costs have increased over the last year, and according to some of them, this is a more relevant factor for growing prices than the hike of fuel prices. Bulgaria is not a producer of energy resources, and it is logical that any increase in energy prices will lead to higher import prices and larger expenses for Bulgarian companies and households, said Luchezar Bogdanov of Industry Watch. Bulgaria is a producer of nonferrous metals, and in this sense the international market situation is favourable for part of the Bulgarian industry, partly offsetting the effect of high energy prices, Bogdanov said. It is therefore difficult to say whether the Bulgarian economy is losing or gaining from global trends of the last few years, but it is developing well rather than poorly, he said.According to Bogdanov, the considerable flow of investments into the Bulgarian economy does not depend on high energy prices.The investment boom is due to the fact that Bulgaria has serious advantages over other European countries in terms of business start-up conditions.He noted that labour costs have been the most actively growing costs in the last year and, therefore, they are a much more decisive factor for Bulgarian business than fuel prices.Valentin Ivanov of BenchMark Finance said the depreciation of the US dollar will make the Bulgarian economy more expensive and the country's foreign trade in dollars will worsen.Ivanov expects that inflation in Bulgaria will remain higher than the EU average level, reaching 7-8 per cent or even more. According to him, this is normal for a country whose real economic growth is around 6 per cent.Tsvetoslav Tsachev, head of the Analysis Department at ELANA Trading, the dollar depreciation will have a contradictory effect on the Bulgarian economy. The reason is that oil prices are increasing in dollars, and the depreciation of the US currency limits the increase. Inflation in 2008 will range between 8 and 10 per cent, if not more, according to Tsachev. He noted that Bulgarian exports are largely directed at European countries, which is why the country's economy is relatively protected from the dollar depreciation.The increase of international oil prices will cause inflation pressure to grow on the domestic market, resulting in growing consumer prices, said Sergei Zhoulev of LEV Corporation. This will lead to slower economic growth in 2008 and 2009, which will make it possible that Bulgaria joins the group of EU countries where initial signs of recession are becoming visible. A worsening crisis in the US will inevitably affect the economies of the EU member states and the Asian countries, and the worse-case scenario will be a crisis of the world banking system, Zhoulev said. Such a crisis is particularly dangerous for the economies of the new EU member states, he said.
U.S. Report: Corruption in Bulgaria goes unpunished
The buying of votes during the municipal elections, the organized busing of voters from abroad, the corruption in the executive, legislative and judicial branches of government and the inefficiency in fighting it were among the critical remarks to Bulgaria in the Annual Report on Human Rights Practices for 2007, released by the U.S. Department of State. The government generally respected the human rights of its citizens in 2007 but there were problems in several areas, according to the report. Most of them are related to police abuses and corruption in the executive, legislative and judicial branches of government. The law provides criminal penalties for corruption by government officials but the government did not implement the law effectively and officials often engaged in corrupt practices with impunity, the report states. Other violations mentioned in the report include the vote-buying surge during the municipal elections held on October 28. Observers noted that the surge in vote buying was prompted by efforts of business circles and organized crime figures to install local politicians as a way to gain greater access to expected EU funds. Another significant type of violation was the organized busing of voters from abroad, usually referred to as "election day tourism." In addition to the busing of voters from Turkey, observed during previous elections, the October elections attracted "election tourists" from Macedonia. Corruption and organized crime are a problem in Bulgaria. During the year the government undertook measures to fight low-level administrative crime, but did not aggressively prosecute high-profile organized crime or corruption, the report reads. The list of the remaining violations is long and includes limitations on freedom of the press, discrimination against religious minorities, discrimination against persons with disabilities and children trafficking.
Inflation wave hits pockets, policy in East Europe
Publication: www.bbj.hu
Until recently eastern Europe had strong growth, but prices were fairly steady: now, led by food and fuel prices, basic necessities are rapidly being priced beyond people's reach. The elderly are feeling the sharpest punishment for their governments' ambitions in taking the eastern European states into the European Union. But prices surging at double-digit rates also pose a dilemma for officials who are forced to choose between supporting growth and capping prices. With price rises galloping beyond target levels, the rampant erosion of purchasing power is also delaying some countries' hopes of adopting the euro. For people in the east, much poorer on average than their western counterparts and spending more of their income on basics, price rises are a daily dilemma. The rate of price rises in Bulgaria at 13.2% is not far behind Latvia's 16.7%, the highest in the EU. 80-year-old Ivanov's pension is 120 Latvian lats ($265) a month and his food needs are taking more than half of it. He has started to sell his belongings to find money to live. "A month ago this cost 2 lats, now it costs 3," he said holding a bag of curd cheese at the central market in Riga. "For us pensioners it is impossible, I don't know, what the government is thinking." In Sofia, 72-year-old Vankova is living off savings, unable to pay for power and medicines on her pension of 102 lev ($80.38) a month: "The situation is getting worse after we joined the EU," she said. Governments and central bankers tend to reassure people that the pressure of price rises will ease off in the H2 of the year. Latvian Prime Minister Ivars Godmanis has said he sees inflation at between 9 and 9.5% by the end of 2008. But on a policy level the challenges are tough. "It is a much more testing time now," said Lars Christensen, senior analyst at Danske Bank. "Some countries will do the wrong thing, and some will do the right thing -- the point is that there is no optimal response (to the current inflation rise)." The Baltic states and Bulgaria have not only had their hands tied by pegging their currencies to the euro, disabling them from adjusting interest rates to tackle inflation. They have also been forced to import low interest rates from the euro zone just when their own growth has been strongest.
POLITICAL PRESSURES
Instead, governments use budget policy to rein in demand. Bulgaria has the tightest fiscal stance in the EU with a surplus last year of 3.8%. Latvia and Estonia have also built up surpluses and commercial banks have slowed lending, which helps decrease consumer demand. The quandary is that such fiscal rectitude is good for fighting inflation, but is not ideal when growth slows, as in Latvia, Lithuania and Estonia: Latvian and Lithuanian growth edged down to 8% in the final quarter of 2007 and in Estonia it has slowed to 4.5%. High inflation can also increase political pressures. In Latvia, the government has had to agree to index pensions twice a year. In Bulgaria, teachers, doctors, miners, pensioners and social workers have all protested to demand higher pay. For Poland, the Czech Republic and Hungary -- with no fixed rate regime enabling the central bank to use interest rates to fight inflation -- the challenge is getting the balance right between dampening prices, potentially at the cost of growth. Some independent forecasts also suggest, that as the global economy slows, led by declining demand from the United States, which should dampen demand for oil, inflation may calm down. "In terms of the inflationary picture, we are close to the peak," said Christensen at Danske. "Governments have to avoid doing something stupid for the next half year or 7 months and then inflation will start to move down in the autumn and through 2009." But with grains prices supported by low stocks and high demand for biofuel use, the dampening effect may only be partial. And people are already alarmed. In Latvia, a sense of impending crisis has come from daily newspaper reports about how food is now more expensive than in western Europe, even though salaries are much lower. For instance, milk in a Latvian supermarket is about 0.50 lats ($1.11) at its cheapest, versus 8 Swedish krona ($1.31) in Sweden, a difference of 18% in dollar terms. At the same time, Sweden's average salary is about 30,000 krona ($4,924), five times Latvia's 398 lats ($880.9), according to data from their statistics offices. With record wheat prices making bread more expensive, Latvians are buying more potatoes than bread, according to a survey of food producers by business daily Dienas bizness. Bulgaria's average monthly wage of �250 is the EU's lowest: many Bulgarians travel to neighboring Greece or even Turkey for cheaper food. And official figures only tell part of the story. "I have the feeling that food prices have jumped 100%," said Mariana Petrova in the Bulgarian capital, a mother of four who runs a small business. "If previously we needed 500 levs ($392) to cover monthly bills and buy food for our family, now we need over 1,000 levs... I often travel to Turkey on business and use the opportunity to buy cheaper vegetables, fish, meat," she said. (Reuters)
ANALYST FORECAST:
Domestic consumption, investments help Bulgaria's economy grow 5.7%-6.0% in 2007
Publication: Iva Doneva, SeeNews
Bulgaria's economy increased by a real 5.7-6.0% last year thanks to rising domestic private and public demand and strong investments, a slightly slower growth rate than the previous year, analysts forecast on Thursday, ahead of official figures. The analysts polled by SeeNews also said they believed Bulgaria's gross domestic product (GDP) grew by a real 5.5-6.0% year-on-year in the fourth quarter of last year, faster than a year earlier. The National Statistics Institute will release the official data on Monday. The government in Sofia puts the country's economic growth at 6.4% for last year. Bulgaria recorded 6.1% GDP growth in 2006 and 5.7% year-on-year growth in that year's fourth quarter. The country's total economic production was 49.1 billion levs ($38.8 billion/25.1 billion euro) in current prices. Simon Quijano-Evans, Senior Emerging Markets Analyst at CAIB/Bank Austria, and Ivailo Vesselinov, Senior EEMEA Economist at Dresdner Kleinwort Wasserstein, expect the data to show the country's economy has grown 5.7% last year while Ivan Petrov, Country Manager in Austrian Dexia Kommunalkredit Bank in Vienna, is more optimistic, seeing last year's GDP growth at 6.0%. "For the full year I think we are going to see growth of 5.7%," Quijano-Evans told SeeNews. "The main drivers of growth obviously continue to be private consumption but also investments basically," he said.
Foreign direct investment (FDI) in Bulgaria rose by over 30% to a preliminary 5.7 billion euro last year. According to government estimates it will reach a real 6.0 billion euro after the central bank revises its preliminary figures. According to Vesselinov the main reason for the expected slowdown in GDP growth in 2007 was the negative contribution from net trade. "It [the main reason] has been the same for the whole year - the negative contribution from net trade has deteriorated quite sharply over the course of 2007. We expect that this will be the main driver that drags down overall GDP growth in comparison with 2006," Vesselinov told SeeNews. Vesselinov thinks that there will be "a rebound" in the fourth quarter of 2007 and that the economy will grow by 6.0% year-on-year compared to 4.5% in the previous quarter. "That is due to the fiscal impulse that we saw at the end of last year - meaning increasing government spending which has boosted both private and public consumption," Vesselinov said. The financial and tourism sectors, metallurgy and light industry, to a lesser extent, will be the main drivers of growth this year, thinks Petrov. "Both the summer and winter seasons of last year were very strong and I think that tourism revenue will have considerably increased which will help the 6.0% rise in GDP," Petrov told SeeNews. The construction sector, which is closely linked to tourism, with 85% of the construction activity last year concentrated on vacation villas and hotels, also played a key role in the Bulgarian economy last year, Petrov said. The local financial sector, which has not been affected by the subprime crisis which hit the U.S. last year, has also helped GDP growth in 2007. "By the end of the first nine months [of 2007] the financial crises has not affected Bulgaria [] and I expect that all financial institutions will report good financial results for last year." Metallurgical companies have had plenty of orders in the past two years and they even lack spare capacity to meet demand for this and next year, Petrov said. High steel and metal prices on the global markets and the cheap local labour force help them to be competitive, he added. The other sector that contributed to Bulgaria's economic growth in 2007 was light industry, as a big part of the clothing factories are producing for domestic consumption which has been recently rising following the increase in lending and improving living standards, Petrov said. According to Quijano-Evans, the bad performance of the domestic agriculture sector due to last year's drought will affect GDP growth but investments will offset it. Agriculture output in the whole of 2007 was severely hit by the drought and the sector will not be as strong a driver of growth as it was in previous years, said Vesselinov. "There will be a certain slowdown [in agriculture] but the rest of the sectors will compensate for it. If the agriculture sector was well-performing we could have expected a higher rise in GDP - of some 8.0% - 9.0%," Petrov said. "That's the bottom line basically - bad performance of the agricultural sector in 2007, strong investments [...] which to a certain extent compensate for the poor agricultural production and on the other hand household consumption remains very strong while government spending is restricted basically in order to the draw down the current account deficit," Quijano-Evans said.
2008 OUTLOOK
All three analysts polled by SeeNews expect that this year's growth will be slower compared to 2007 as the effects of the global credit crunch are felt in Bulgaria and because of expected higher consumer prices. "I am looking actually now for 4.6% - basically because you have the global credit crunch the first thing and secondly that there has to be basically a slowdown in banking sector lending," Quijano-Evans said. According to him, measures to restrict lending growth are "clearly necessary". He expects that higher inflation will hit real incomes this year and thus real GDP growth and that construction spending will slow also this year given global effects on the whole region. The "poor base effect from 2007 from the agriculture sector" will also cause the lower GDP growth in 2008, he said. Bulgaria's annual inflation accelerated to 13.2% in February year-on-year from 12.5% in January. The country reported annual inflation of 12.5% at the end of December 2007. Quickening inflation was mainly due to rising food prices last year as drought and floods damaged crops. Surging international oil prices also fuelled inflation. According to Vesselinov, Bulgaria's economy will grow by 5.9% this year with the growth due to a combination of fiscal loosening and the fact that there will be favourable base effects. "The [2008 economic] growth will slow down - we expect it at around 5.0%. It will be because of the slowing down in the construction sector and because of the problems in the financial sector as the cost of lending will increase following the global trend, which will cause the limitation of domestic consumption," Petrov said. Following are GDP growth forecasts made by the three analysts polled by SeeNews: Q4'07 2007 2008; Simon Quijano-Evans, CAIB/Bank Austria +5.5% +5.7% +4.6% ; Ivailo Vesselinov, Dresdner Kleinwort Wasserstein +6.0% +5.7% +5.9% ;
Ivan Petrov, Dexia Kommunalkredit Bank n.a. +6.0% +5.0% .