불가리아 주요 경제뉴스 ( 28 NOVEMBER – 5 DECEMBER 2008 )

 

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT ( 28 NOVEMBER – 5 DECEMBER 2008 )

 

 

 

Sections/headline briefs:

 

MACROECONOMY:

 

·        Bulgaria to save € 6 B per year from energy import

·        Minister: We will not let Bulgaria receive sanctions

·        Official data show water losses in Bulgaria at 61.7%

·        Labor market in Bulgaria shrinks by 30%

·        Bulgaria enters 2009 with cigarette prices hike

·        Bulgaria President secures Qatar Sheikh participation in energy forum in Sofia

·        Bulgarian Business Leaders Forum celebrates 10th anniversary

·        Spain to assist Bulgaria in EU funds absorption

·        Bulgarian banks grant loans of up to BGN 1 M  to small businesses

·        30% decrease of orders in the textile industry

·        IMF mission arrives in Bulgaria

·        Welders… import?

·        Bulgaria negotiated Egyptian natural gas

·        Initial required capital for the registration of a firm decreased 50 times

 

INVESTMENTS:

 

·        Invest Bulgaria Agency nominates "Investor of 2008"

·        Bulgaria - second in the world in investement attractiveness

·        Bulgaria parliament approves corporate tax breaks for large investors

·        Bulgaria's foreign investments down by € 1 B due to global financial crisis

·        Bulgaria investment company receives prestigious UK awards

·        New mall in Pleven

·        Bulgaria's new largest shopping mall to be constructed in Varna

·        Ukraine's Smart Group to invest € 200 M in Kremikovtzi

·        Promet Steel invests € 3.2M in new machine

·        Bulgaria's Ecobulpack to invest € 5.1  in waste treatment facilities in 2009

·        Investments in Bulgaria's construction sector to fall by up to € 1.2 B next year

 

 

COMPANIES:

 

·        Melrose Resources, Bulgargaz to become JV partners in $90 M project in Bulgaria

·        Canada's Dundee to restart gold project in Bulgaria

·        Financial collapse for Bulgarian companies

·        Cigarette maker Bulgartabac expects 50-55% market share next year

·        Shipping company Navibulgar cuts costs to stay afloat

·        Over 70 brands to present the best of the best at 3rd Lux only show in Sofia

·        The State becomes owner of "Toplofikatsiya Sofia"

·        Ericsson opens new logistics centre in Bulgaria

·        BTC sells broadcasting operations to Austria's ORS

·        Italy's Enel gets regulatory approval to buy 13 wind farm companies in Bulgaria

 

 

GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:

 

·        Together against crisis

·        PM Stanishev: Bulgaria is in its first real capitalist crisis

·        Economic crisis reaches Bulgaria

·        Bulgaria's textile industry expects severe blow by global financial crisis

·        East European economies crack, with Romania and Bulgaria the worst off

·        Eastern Europe economic model flawed

·        PM: Half of EU finance ministers should be fired, Oresharski remains

·        Global financial crisis has only psychological effect on Bulgaria travelers

·        Projects in tourism for € 2.25 billion put on halt

·        Bulgarian wine's niche on the Russian market shrinks

·        Bulgaria’s black market gears for rebound

·        Bulgaria's policy response to external shocks

 

 

 

Articles:

 

 

MACROECONOMY:

 

Bulgaria to save € 6 B per year from energy import

The project for Energy strategy of Bulgaria till 2020 is already published on the website of the ministry of economy and energy (www.mee.government.bg), informed the press center of the institution. The obligatory according to the law environmental assessment of the strategy is yet to be prepared. The strategy envisages improvement of the energy efficiency and use of cleaner energy. Among the European aims of the project are the reduction of the harmful emission with 20% till 2020 as well as increase of the share of the energy produced from renewable sources again with 20% till 2020.With the implementation of the strategy, the Bulgarian government has the intentions to save 6 billion euro from energy import expenses per year and 50 million tones of harmful emissions per year. A two times less energy intensity of the gross domestic energy consumption should be achieved by 2020.The ministry of energy provides all citizens with the possibility to comment, criticize, recommend and give suggestions as well as to ask questions on the project. Leading experts from the ministry who have taken part in the document's preparation will be open for free dialogue and responses via the ministry's website, adds the press center of the ministry.

Minister: We will not let Bulgaria receive sanctions

"We will not let Bulgaria receive sanctions in connection with the recommendations made by theEuropean Commission," Environment and Water Minister Djevdet Chakurov told journalists in Parliament on Friday.He was asked to comment on the written warning sent by the European Commission on Thursday in connection with the incorrect implementation of the Waste Framework Directive.The scope of the working group of the Environment and Water Ministry and Sofia Municipality, which has been working on the problem of household waste in Sofia, has been enlarged; representatives of other ministries have been included, Chakurov said.He said he has asked for a meeting with EU Environment Commissioner Stavros Dimas and Regional Policy Commissioner Danuta Hubner.It is being discussed how to provide funding under an operational programme for the waste management project in Sofia, Chakurov said. This will be decided in dialogue with the European Commission, he said.The Minister said the project for Sofia is a priority one both for the central government and the municipality.A total of 367 million euro has been earmarked in the financial framework for the Operational Programme for the Environment - there is no way of building the plant and all regional landfills, he said. one opportunity, which is a European practice, is to build these plants through public-private partnership, he said. According to Chakurov, there is very serious investor interest.The Minister said that the waste problem in Sofia has been inherited by the central government and the municipality. Its solution is a priority for the Environment and Water Ministry, he said.

 

Official data show water losses in Bulgaria at 61.7%

Official data show that the average water loss in Bulgaria stands at 61.7 per cent. Forty-four per cent of drinking water is treated by 42 water treatment plants, said Roumen Arsov, Chief Secretary of the Bulgarian Water Association (BWA). He addressed a working meeting on developing the water sector's capacity on Thursday.Nearly 99 per cent of Bulgarians are connected to central water supply systems managed by the water and sewerage companies. Currently, the length of water pipes totals 73,500 km. Seventy-three per cent of the pipes are made of asbestos cement, which Arsov called "a tragedy".Also, 57 per cent of the water pipe networks were built before 1970 and are worn out. only 0.1 per cent of the water pipe networks are newly-built, and another 0.3 per cent have been repaired, Arsov said. on average, nearly 70 per cent of the population is connected to sewerage networks, which are also managed by the water and sewerage companies. Seventy-one per cent of cities are connected to sewerage networks, which service 95 per cent of their population. In contrast, only 2.5 per cent of rural settlements have sewerage networks, which service 9 per cent of the rural population. The total length of sewerage networks exceeds 10,000 km. Of these, some 85 per cent are made of concrete or ferro-concrete pipes. Water infiltration through these adds to water losses through the water supply networks.Some 90 per cent of the sewerage networks were put into operation before 1990, and 64 per cent of waste water is treated by the 72 waste water treatment plants in Bulgaria. Of these, 54 employ biological (secondary) treatment, and the other 16 use mechanical (primary) treatment.Some forty-one per cent of the population and eighty-five towns are serviced by these treatment plants, which are also part of the assets of the water and sewerage companies. Under the Operational Program Environment, a total of 430 waste water treatment plants will start operating in settlements with a population of over 2,000 by 2015, which requires a huge effort, Arsov said.The expenditure on tangible fixed assets for environmental purposes in the water sector between 2002 and 2006 added up to 590 million leva, of which 250 million leva were spent on waste water treatment plants.The investments needed in the water sector in Bulgaria are currently projected at over 10,000 million euro. Arsov said that at the present rate of investment growth the goals set in the National Program cannot be achieved.Currently, 1,700 engineers, 1,200 mechanics and 12,300 workers are employed in the water sector. Administrative staff numbers 2,500.An extra 1,200 engineers, 1,400 mechanics and 7,000 workers will be needed for the waste water treatment plants and sewerage networks which are planned to be built.

Labor market in Bulgaria shrinks by 30%

The number of available job positions on the labor market in Bulgaria has shrunk by 25-30 percent on the average. Although there are no large-scale layoffs, the companies in Bulgaria have frozen their vacant job positions, representatives of the Eurokarieri forum told The Standart. Jobs.bg, one of the largest websites for career and employment opportunities in Bulgaria, advises its visitors to start attending alternative training courses, even if they have stable careers. The ads for available job positions in the industry sector were the first to disappear from the website. Real estate agencies have stopped recruiting personnel, but there still are vacancies in the IT sector.The highly-qualified young Bulgarians who are coming back from abroad are the priority target of every employer, HR agencies say. Statistical data show that Bulgarian laborers are mostly coming back from Spain and high-skilled experts, from Germany and USA. The labor market in Bulgaria may see some layoffs in January, when some employers may decide not to extend the labor contracts of their employees.

Bulgaria enters 2009 with cigarette prices hike

Cigarette packs produced by Bulgaria's Bulgartabac Holding are to go pricier from January 1 due to higher excise duty, the company's Managing Director, Korneliya Ninova, announced Friday.Prices will jump up by 26%. Thus the most popular Victory packs will cost BGN 3.45 instead of the current BGN 2.75.Melnik will be the most costly Bulgarian brands - BGN 2.90. A price of BGN 3.15 will be introduced for largely smoked Sredetz packs.The move is expected to get many inveterate smokers round to quit their unhealthy habit.Cigarette maker Bulgartabac has registered a 50,59% increase in sales revenue in the first nine months of 2008 compared to the same period of 2007.The total amount of the increase in sales revenue for this period is BGN 14,102 M. At the same time the total net revenue of the company in January-September, 2008, amounted to BGN 54,344 M. However, much of the revenue came from the sale of two of the monopoly's four cigarette plants located in the cities of Plovdiv and Stara Zagora. The two factories were sold on the Sofia Stock Exchange in July in order to restructure the company and to consolidate the production in the cities of Sofia and Blagoevgrad.

Bulgaria President secures Qatar Sheikh participation in energy forum in Sofia

Bulgaria's President Georgi Parvanov, who is in Qatar has extended an invitation on Sunday to the Sheikh of Qatar Hamad bin Khalifa Al Thaani to attend the international energy forum in Sofia next spring and the Sheikh has accepted it, the Bulgarian National Radio (BNR) reported.The President is in the capital of Qatar, Doha, to attend the Follow-Up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus. The Conference was opened officially on Saturday, November 29, by the Secretary-General of the UN Ban Ki-moon, and will continue until December 2.The Forum is attended by state and international institution leaders from all over the world.On Sunday Parvanov is scheduled to make a statement before the participants in the forum.In addition to the Sheikh, during his visit, Parvanov will meet with the Croatian President Stjepan Mesic, and with UN Secretary-General Ban Ki-moon.The so called Monterrey Consensus was adopted at the 2002 UN Conference on Financing for Development.It is widely seen as a cornerstone in international development cooperation, and includes the mobilizing of domestic and international resources, and the use of international trade and technical cooperation for development purposes.

 

 

 

 

Bulgarian Business Leaders Forum celebrates 10th anniversary

The Bulgarian Business Leaders Forum celebrated its 10th anniversary on Thursday with a dinner and a charity ball, held at the Hilton hotel in Sofia.The collected funds in the amount of BGN 21,000 will be donated for in vitro procedures for disadvantaged Bulgarian families, the Executive Director of the Forum Stamen Tasev announced.Participants in the event included the Ambassador of Great Britain to Bulgaria Steve Williams, and Henry Jackelen, UN Resident Coordinator/UNDP Resident Representative for Bulgaria. Adam Leech, the new Executive Director of the International Business Leaders Forum for the Prince of Wales was a special guest of the event. This was Leech's first trip to Bulgaria.The Bulgarian Business Leaders Forum was established in 1998 by 12 companies and with the support of His Majesty the Prince of Wales and the then Bulgarian President Petar Stoyanov. In 10 years the Forum has grown to 220 companies, non-governmental organizations and individual members, creating successful social projects and actively publicizing the idea of corporate social responsibility.The Forum also develops significant education projects and bestows annual "Responsible Business" awards.In 2001, the Forum created the Business Ethics Standards that became a model for ethical behavior in the business environment. Currently over 1,500 companies in Bulgaria have adopted the Business Ethics Standard and use it as a main guideline in their corporate behavior.

Spain to assist Bulgaria in EU funds absorption

Bulgaria's PM Sergey Stanishev and his Spanish counterpart Jose Luis Rodriguez Zapatero agreed yesterday Spanish experts to assist Bulgarian administration in EU funds absorption. The two PMs met at the session of PES Council, taking place in Madrid on 1-2 December, the headquarters of BSP informed.PM Stanishev and the President of the Socialist International and chairman of PASOK Georgios Papandeou were categorical that EC's decision on freezing part of the EU funds to Bulgaria might discourage the countries negotiating to join the EU. Before the socialist presidents and PMs, Stanishev pointed out that the global financial crisis could open a possibility to the left wings in Europe to propose the necessary measures to protect people. Without providing powerful social-democratic policies aimed at creating new job positions and social protection, there is a risk the global crisis to bear political monsters, noted Bulgaria's PM reminding the unprecedented 1929 depression.

Bulgarian banks grant loans of up to BGN 1 M  to small businesses

In the conditions of a global financial crisis the small and medium-sized businesses can draw banks loans of up to one million levs (1euro=1.95levs) to solve their financial worries. The loans are granted by the Bulgarian Bank for Development (BBD). BBD will grant credit lines of up to ten million levs to commercial banks which can later be distributed among the small businesses. The funds will be allotted for long and short-term target loans, pre-export financing and for the financing of small and medium-sized business projects under the EU structural funds. BBD CEO Angel Gekov said the interest on their loans was one of the lowest in Bulgaria. The loans will be secured according to the standard requirements of the Bulgarian banking system. The credit lines will be allotted to the banks for ten years with a five-year grace period. "To be granted credit lines, the financial institutions should meet certain requirements, among them being a declaration of their owners stating that they give up on the payment of dividends," Gekov said. Seventeen commercial banks have already applied to receive credit lines from BBD.
The refinancing of the commercial banks is part of the "market flexibility" set of measures of the Bulgarian government, meant to minimize the effects of the financial crisis on the country's economy. The capital of BBD will be increased by 500 million levs, which will be used for target financing of the commercial banks and also to facilitate the access to financing of small and medium-sized businesses.

30% decrease of orders in the textile industry

The Chair of the Bulgarian Association of producers and importers of clothing and textile Valeria Zhekova forecasted a 30% decrease of orders and the same amount of people laid off in the next 4-6 months. She pointed out that there are already bankrupt firms, while other are being restructured and work on anti-crisis programmes.Among the urgent measures, which have to be accepted, Zhekova pointed to aid for firms, in order for them to improve their liquidity and to create conditions for flexible work hours.Moreover, the state must make arrangements for social payments and aid workers.

IMF mission arrives in Bulgaria

Between 4 and 15 December a mission of the International monetary fund (IMF) will be held in Sofia for the regular annual review of Bulgaria according to article IV of the Constituent contract with the Fund.Within the framework of the visit, the IMF team will meet representatives of the government and the Central bank to discuss with them the implementation of the macroeconomic indicators and the financial and economic policies, conducted by the country in the current year.

Welders… import?

Association of Industrial Capital has asked the Ministry of Labor and Social Policy urgent help for import of 300 foreign welders for Machinery Construction brunch for 2009. The news came against the background of the often mentioned poring prognoses for rising unemployment rates in the construction brunch. Besides these 300 welders there would be a need of another 200 workers with different occupations of the same Machinery Construction craft for 2009.The other problem in Bulgaria is the transport brunch. More than 95% of those who graduate ‘Economy of Transport’ immediately start working in their subject, Prof. Hristo Parvanov, dean of the faculty Economy of Infrastructure in the University for National and Global Economy in Sofia said.When asked whether students who have graduated Economy of Transport are sought for, he answered ‘They are sought a lot, even during the last months, regardless of the crisis’.
The problem with the financing of the public transport is in need of a new analysis and a new mechanism, Ekaterina Yordanova, leader of the transport trade union of the Confederation of Independent Trade Unions in Bulgaria /CITUB/ announced for FOCUS News Agency.Yordanova noted that the trade union opposes the double standards, used towards these companies.According to Yordanova Sofia does not get enough financing because it serves one third of the population in Bulgaria.

Bulgaria negotiated Egyptian natural gas

Economy Minister Petar Dimitrov and Egyptian Petrol Minister Sameh Fahmi agreed upon deliveries of Egyptian natural gas to Bulgaria. At first, the deliveries could be 0,5 - 1 billion cubic meters and later on they can increase, Petar Dimitrov announced.The deliveries are expected to start in 2011.Sergey Stanishev is expected to visit Egypt in January 2009 and a memorandum for cooperation is to be concluded - mostly in the sphere of economics, Dimitrov announced.He added that the opportunities for joint research and extraction of petrol and gas of Bulgarian companies in Egypt and of Egyptian companies in Bulgaria have been discussed.The two Ministers defined the talks as extremely successful.Petar Dimitrov pointed out that Bulgaria is the only physical portal, through which the Egyptian energy network can be connected with the European energy network.

Initial required capital for the registration of a firm decreased 50 times

The initial capital for the registration of a firm is decreased from 5000 to 100 levs. The measure will become effective after the government approves changes in the Commercial Law. The high amount of the minimum capital by now is one of the hindrances for starting small business.It is expected that the significant decrease will stimulate enterprising citizens to realize their projects, which will lead to the opening of new work positions and the availability of more products and services.According to the indicator sum of minimum capital for the initiation of business in relation to the gross national income of a person, Bulgaria is 36^th in the classification organized by the World Bank. The conclusions from the study "Making business" report a significant increase of the activity of countries, which have removed or significantly decreased the requirement for minimum capital.  

 

 

 

 

 

 

 

 

 

INVESTMENTS:

 

Invest Bulgaria Agency nominates "Investor of 2008"

The Invest Bulgaria Agency announced on Monday their nominations for the "Investor of the Year 2008" including "Kaliakra Wind Power", "Devnya Cement", "Weinerberger", "Lufthansa Technik - Sofia", "Hewlett Packard", the "Specialized Eye Clinic for Active Treatment (SOBAL) Dr. Taskov".The Kaliakra Wind Park, located near the village of Bulgarevo in the Kavarna municipality has received a first class investor certificate on 2006. The park officially opened in July of 2005 and has 35 wind generators. The project is evaluated at BGN 90 M and has been realized together with the Bulgarian engineering company "INOS 1" and the Japanese "Mitsubishi Heavy Industry.""Devnya Cement" is controlled by the French "Ciment France", part of the Italian "Italcementi" company. The total investment amount of Italcementi for the acquisition and renovation of cement plants in Bulgaria (including "Vulkan" in Dimitrovgrad) is EUR 200 M. In 2008, "Devnya Cement" marked its 10th anniversary of entering the Bulgarian market.In June 2008, the Austrian "Weinerberger" company opened a modern plant, with a fully automatic production line for ceramic blocks in the town of Lukovit. The investment is estimated at over EUR 25 M. The plant is fully compliant with energy effectiveness standards, environment protection and safe working conditions.On October 28, a modern facility for airplane repairs opened doors at the Sofia Airport. The investor is a joined stock company between the German "Lufthansa Technik" and the Bulgarian "Bulgarian Aviation Group" with a 20% share. The new hangar has an area of 6,000 square meters, allowing for two airplanes to be serviced at one time. The hangar employs 350 highly qualified workers, providing fast services to "Boeing" and "Airbus" planes. The EUR 20 M investment has been used for the hangar's renovation, equipment, materials and employee training."Hewlett-Packard" is nominated for generating new job opportunities and for training in the area of high-end technologies of over 1,280 individuals. It is expected that their number would reach 2,000 in 2009. In 2006, the company built a high-technology center in Sofia to service customers from Western Europe with software and hardware products.In October, the "Specialized Eye Clinic for Active Treatment (SOBAL) Dr. Taskov" opened doors in the city of Turgovishte as a successor of the former "Dr. Taskov" clinic. In the past 10 years, the clinic has conducted over 10,000 eye surgery procedures for patients in Northeastern and Central Bulgaria. The clinic specializes in diagnosis, treatment and surgery of eye disorders, medical and cosmetic procedures and scientific activities. The new building houses four modern surgery rooms, five cabinets and 50 hospital beds along with modern equipment. The investment amount is estimated at BGN 3,5 M.

 

 

 

 

Bulgaria - second in the world in investement attractiveness

Main instrument for combating the crisis in Bulgaria are the investors, claimed the minister of economy and energy Peter Dimitrov at the award ceremony for “Investor of the year” yesterday, informed BNR. According to Dimitrov, Bulgaria ranks second in investment attractiveness in the world. The country is outpassed only by Hong Kong. The government will put efforts in preserving these positions, promised the minister of economy. Despite the promises, 2008 marks a serious drop in the investments compared to last year. For the first 9 months they are around one billion euro less than in 2007, when they were 6.6 billion euro. In 2005 the investments were hardly 3 billion euro.

Bulgaria parliament approves corporate tax breaks for large investors

Bulgaria's Parliament voted Tuesday night amendments to the corporate tax law providing for breaks for large investors.The approved changes state that a company, which invests in the Bulgarian economy over BGN 10 M in one year, or over BGN 50 M in five years, would be allowed to defer the payment of the corporate tax for a period of five years.The decision would benefit investors in the high-tech industry, manufacturing, infrastructure development, processing industry, and the agriculture sectors. Bulgaria presently has a flat-rate corporate tax of 10%.At the same time, however, Bulgaria's Parliament voted Tuesday against the reduction of the value-added tax, which had been proposed by the rightist opposition.The suggested decrease of VAT from the present 20% down to 18% as well as its reduction to 5-7% on medicines, textbooks, printed editions, and food were rejected by the ruling three-way coalition.The MPs also decided to increase the excise tax on cigarettes - from the present BGN 37 per 1 000 pieces plus 35% of the sale price to BGN 40,5 per 1 000 pieces plus 42% of the sale price.The measure was motivated by Bulgaria's commitment to reach the minimum excise tax rates in the EU.Finally, the Parliament decided to give tax breaks to young families with mortgage loans. The measure benefits any married couple below 35 years of age owning only one house or apartment by reducing their taxes by the amount of the annual interest on their mortgage.

Bulgaria's foreign investments down by € 1 B due to global financial crisis

 

Bulgaria's foreign direct investments in 2008 have declined by EUR 1 B compared to their 2007 level as a result of the global financial crisis.This was announced Friday by the Bulgarian Minister of Economy Petar Dimitrov in an interview for the bTV channel. Dimitrov also said the decision of the European Commission to strip two Bulgarian executive agencies of their accreditation thus depriving the country of hundreds of millions of EU funding had been an unpleasant surprise for him.In his words, however, Bulgaria should not be fatalistic because it had EUR 6 B of foreign direct investments per year. The main problem according to Dimitrov was the fact that Bulgaria's image was suffering at a moment when Eastern Europe was more stable than the old EU member states, and as a result foreign investors would turn to the region.

 

 

 

 

Bulgaria investment company receives prestigious UK awards

 

The Bulgarian investment company Green Life received two annual awards from the prestigious UK magazine Homes Overseas at a ceremony held in London.The 2008 winners were announced at a Gala dinner and awards ceremony on the evening of Friday, 28 November 2008 at The Grosvenor House Hotel, Park Lane, Mayfair, London.Green Life participated in the contest with two of their newest projects - Еvridika Hills in the winter resort Pamporovo and Paradise View in the beach resort Sozopol. Both projects won respectively the silver and bronze price in the Best Development Bulgaria category. The magazine did not award a gold prize in the category.Other categories include Developer of the year, Readers' Choice Award, Best Development Cyprus, Canada, France, Cape Verde, Central and South America, Spain, Morocco, Italy among others.Green Life receives awards by the magazine for the second consecutive year. Homes Overseas has been on the market for over 40 years and is one of the most influential British magazines advising Brits about the best ways to invest all over the world.The annual Homes Overseas Awards are bestowed to the best construction projects and to leading companies in the areas of real estate sales and marketing. Each project is personally visited by a judge in order to determine the best entrepreneur and the best residential properties that would be the most profitable for the British.Green Life invests mainly in construction of vacation villages in Bulgarian beach and winter resorts.

 

New mall in Pleven

 

The first commercial and recreation centre in Pleven - Central Mall Pleven – has greeted its first wave of clients with 95 per cent of its capacity being “occupied”, according to Valerii Ruskov, manager of the investment company Nia, the mall's main investor. It took 12.5 million euro to transform the old United Bulgarian Bank building into a mall.
The new centre, on Vassil Levski Str, opened on November 28. It's an architectural collaboration between Proskonsult, with architects Krassimir Popov, Sergei Bonev and Emil Borisov.The arduous challenge for the mall started from the onset, both for the investment team and for the architects. A brand new skeleton of monolith aluminum construction was required for the roof and for some of the foundations. The building's former design was mostly retained so that, unlike other malls, there was little room for large windows and open areas. According to the designer agency Creart, this sets the building apart from most malls across Bulgaria, reports Stroitelstvo Gradut.The main concept of the design for the Pleven mall, according to the architects, is “organised chaos”. The top floor has been reserved for recreation and dining, containing a number of restaurants and cafés. The first floor is packed with boutiques, luring customers with a wide array of odours emanating from expensive perfumes. The mall stands four storeys high with escalators and a panoramic lift plus two cargo lifts supplied from Izamet. Central Mall Pleven has a total area of 11 000 square metres. It will house 45 stores, offering a wide range of fashion, boutiques, electronics, cosmetics, telecommunications, hardware and other equipment. A cinema has also been incorporated on the fourth floor - Arena – plus a recreational centre for children, Dream Land.

 

 

 

 

Bulgaria's new largest shopping mall to be constructed in Varna

 

The new largest shopping mall in Bulgaria - Park Cherno More ("Black Sea Park") - will be built in the city Varna as the ECE Projektmanagement company announced Wednesday it had received a construction permit. The news was announced by the Pari Daily, which points out that the company based in Hamburg, Germany, had not specified when the construction works would begin, and whether the Austrian investment fund Immoeast was still part of the project as it had been badly hit by the global financial crisis. The Park Cherno More complex will have a total all-out area of 145 000 square meters, and a parking lot with 1 800 spots. The lease of 60% of its 175 stores with a total area of 60 000 square meters have already been contracted with retail companies. Park Cherno More will be located on the Vladislav Varnenchik Blvd in Varna on the spot of the former diesel engine factory VAMO. Bulgaria's largest shopping mall at present is located in the city of Varna as well. Mall Varna has a total all-out area of 70 000 square meters, and a parking lot with 760 spots.

 

Ukraine's Smart Group to invest € 200 M in Kremikovtzi

 

The Ukrainian company Smart Group is expected to present Tuesday its investment plan for Bulgaria's largest steel mill Kremikovtzi to the Economy Ministry. Smart Group, which is presently considered the main bidder for the purchase of the plant, intends to invest EUR 200 M in the steel-maker, the Pari Daily reported.The investment plan is for a period of five years, and includes investments in extracting technologies, and environmental installations so that the factory could meet EU's environmental standards.

Promet Steel invests € 3.2M in new machine

 

Promet Steel, Bulgaria's manufacturer of steel products, invested EUR 3.2 million in the purchase of a new packing machine in order to follow world standards of packaging in metallurgy. The new system is bought from the Swiss company Sund-Birsta. It is highly automated and the two lines can pack altogether some 200 tons per hour serviced by only four people. The new machine will enable the production to be exported and used in the EU countries.

Bulgaria's Ecobulpack to invest € 5.1  in waste treatment facilities in 2009

 

Bulgarian commercial packaging recovery association Ecobulpack said on Wednesday it plans to invest a total 10 million levs ($6.49 million/5.11 million euro) in waste treatment facilities in 2009. Six million levs of the total investment will go for the construction of plants in Yambol and Plovdiv, both in southern Bulgaria, and in the northern Bulgarian city of Targovishte, Ecobulpack executive director, Georgi Tabakov, told Seenews. Earlier this year the company opened waste separation units in the capital Sofia, in the Danube port city of Ruse and in Pazardzhik, in southern Bulgaria, and a waste recycling unit in Sofia. Ecobulpack services 80 Bulgarian municipalities with a combined population of two million. The company, which launched operations in 2004 has so far invested 35 million levs in waste separation facilities. A total 110 companies are shareholders in Ecobulpack which has a capital of 487,800 levs.

Investments in Bulgaria's construction sector to fall by up to € 1.2 B next year

 

Total investments in Bulgaria's construction sector are expected to fall next year by between 2.0 and 2.5 billion levs ($1.3-1.6 billion/1.0-1.2 billion euro) due to the global crisis and the withdrawal of foreign investors, mainly from Ireland and England, an industry official said on Wednesday. Billions of euros were poured into the construction industry in recent years. Almost half of the combined record high foreign direct investment (FDI) of some 15 billion euro attracted by the EU newcomer in 2006 and 2007 was channeled into construction projects. The construction sector, together with the real estate and financial services, generated around 55% of the country's gross domestic product (GDP) in each of the past two years. Activity in the construction sector has been changing for six months now. Even before there was any indication of a crisis a big part of English and Irish investors have withdrawn from the market," the executive director of the Bulgarian Construction Chamber, Ivan Boikov, told Internet portal Investor.bg in an interview. Investments in the sector fell by 1.5 billion levs year-on-year in the first half of 2008, Boikov said, quoting data of the Bulgarian statistics board NSI. Currently we have 1.5 billion levs in frozen investments in the sector," he told Investor.bg. The two main drivers for the sector's growth next year will be the investment of one billion levs, mainly in infrastructure projects, allocated by the Bulgarian government in the 2009 budget, and around two billion euro expected to come from European Union's funding programmes. Bulgaria joined the EU in January 2007. We have massive construction works lying ahead and this is positive for Bulgaria," said Boikov. Currently there are 5,200 registered construction companies in Bulgaria, of which around 100 generate 80% of the sector's turnover. The small and medium-sized firms are active in just one construction direction. The bigger companies are flexible and stable. I think they will progress, especially in view of the possibility to tap investments of around two billion euro under European-funded programmes," he said. Boikov added he did not expect prices in the residential construction sector to rise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPANIES:

 

Melrose Resources, Bulgargaz to become JV partners in $90 M project in Bulgaria

 

Scottish-based oil and gas company Melrose Resources and Bulgarian state-owned gas monopoly Bulgargaz will team up in a $90 million (71.3 million euro) gas storage joint venture project in Bulgaria, Melrose said on Monday. Last year the two companies agreed to carry out a joint feasibility study to evaluate the conversion of the Melrose-operated Galata gas field into a gas storage facility. "The study concluded positively and plans are being brought forward to convert the field to gas storage with first injection commencing in the third quarter of 2009," Melrose said in a statement. "Melrose and Bulgargaz now plan to enter into a second agreement under which Bulgargaz has the right to become an equity partner in the Galata gas storage project and acquire up to a 40% working interest by contributing its proportionate share of the capital costs and cushion gas requirements," Melrose added. The site is ideally suited for conversion to storage due to its high quality reservoir properties, infrastructure configuration and location, the Scottish-based company said. The storage capacity will be developed in phases over a three year period with a total capital expenditure of $90 million being required to create usable storage capacity of 1.8 billion cubic metres. Melrose said earlier it plans to cease gas production from the Galata field at the end of the year under its plans to transform it into a gas storage facility. Melrose Resources (www.melroseresources.com) also drills in Egypt, the U.S., France and Turkey.

Canada's Dundee to restart gold project in Bulgaria

 

Canadian mining company Dundee Precious Metals said on Tuesday it is restarting a stalled gold project in Bulgaria. The company said in a statement it received on Monday a letter from the Bulgarian Deputy Minister of Environment and Waters requesting it to prepare a report that will assess the compatibility of the Krumovgrad gold project in southern Bulgaria within the scope and purpose of the European network of protected sites, Natura 2000. The report is a prerequisite for the issuance of a decision on the Environmental Impact Assessment (EIA) report of the project. As the compatibility assessment and the EIA procedures are aligned, the ministry should issue a single final resolution on both matters, it said. "This letter officially restarts the Krumovgrad EIA process which has been stalled for three years. While there remains considerable work to be completed and we need to form a dialogue with the local community, this is a very positive step which allows us to move forward with this exciting project," Dundee's President and Chief Executive Officer Jonathan Goodman said in the statement. Dundee operates the Krumovgrad development stage gold property through its wholly-owned subsidiary, Balkan Mineral and Mining. The Krumovgrad project, awaiting regulatory approval from the Bulgarian government, calls for the construction and operation of an open-pit mine which will produce approximately 150,000 ounces of gold/silver ore bullion per year over the first four years. In Bulgaria Dundee, through its other local unit, Chelopech Mining, and in joint venture with the Bulgarian government, is developing a $155-$160 million (121-125 million euro) project for the construction of a gold, silver and copper production plant at its Chelopech mine, some 70 kilometres east of the capital Sofia. Toronto-based Dundee (www.dundeeprecious.com) also has operations in Canada, Serbia and Armenia.

Financial collapse for Bulgarian companies

 

Companies in Bulgaria sense very strong the financial collapse. Latest information reveals that by October 2008 the bank financing has marked a drop of about 60% comparing to the same month last year. Experts believe that this is a serious problem, which will grow bigger from now on. From such processes the micro and medium companies suffer the most, The Pari Daily newspaper reported. CEO of UniCredit Bulbank (the biggest financial institution in Bulgaria) says that the bank expects a portfolio growth even higher than the previous year. Drastic decline in crediting during the first month of the crisis. Large increase of interest rates and the changing the credit approval regulations has lead to drastic decline in the amount of crediting for October, BNB data shows. New approved credits for October amount to BGN 1,68 billion, while in October 2007 loans amounted to BGN 2.09 billion. This makes a 24,44% downsize y/y and 4,11% decline in one month. In October interest rates for consumer loans grew with 3 – 4%. This type of loans was decreased with 14,7% as compared to September and with 23.9% y/y. Corporate loans are with 23,3% less than October 2007.

 

Cigarette maker Bulgartabac expects 50-55% market share next year

 

The state tobacco holding Bulgartabac projects a market share of 50-55% in the country next year as compared to 60% at present. The holding is intending to produce the same volumes like this year and to raise exports to Hong Kong , Taiwan , Benelux and neighbouring countries to compensate the expected drop in domestic sales volumes. The planned increase in the excise tax as of Jan 1 is expected to raise the local prices of cigarettes offered by Bulgartabac by about 26%. Bulgartabac would sell 12bn cigarettes on the domestic market this year and 5.5bn abroad, which will represent a 13.5% growth of exports from last year. The holding sold 8,925 tons of tobacco (76.4% of which exports) and 9,024 tons of cigarettes on the domestic market in Jan-Sep, down by 17% y/y and 13.2% y/y. The sales of the company dropped by 24% y/y to BGN 193.5mn (EUR 98.9mn) in Jan-Sep, according to the consolidated report. The net consolidated profit surged to BGN 19mn from BGN 7mn including one-off gains from the sale of two cigarette plants. Bulgartabac sold the idle cigarette factories in Plovdiv and Stara Zagora in July at the price of BGN 30.9mn and BGN 17.8mn respectively. Before that, Bulgartabac posted a net consolidated loss of BGN 25.4mn in H1 blaming higher tobacco excise taxes, removed protection for local producers, and competition from foreign companies. The holding also plans to sell the remaining two factories in Sofia and Blagoevgrad. The unit in Blagoevgad posted a net profit of BGN 7.5mn in Jan-Sep while the factory in Sofia ran a loss of BGN 1 million.

 

 

 

 

 

Shipping company Navibulgar cuts costs to stay afloat

Bulgaria's former state shipping company Navibulgar, put in private hands earlier this year, will trim its crew by 17 per cent in the face of the global economic turmoil, said Hristo Donev, one of the company’s executive directors. All crews will be reduced to 19 from 23 sailors, but the privatisation contract rules out any lay-offs.The sailors will be most probably moved to subsidiaries the new owner, KG Maritime Shipping, was to set up in line with the new holding structure. The size of the crews to stay on the ship complies with Bulgaria’s maritime safety requirements and with international standards, Donev said.The crews will not be expanded even after the crisis is over with sailors outnumbering the bottom required for Navibulgar’s type of vessels. The measure is aimed at helping the maritime carrier weather the global economic crisis.Some half a dozen of the company’s newer ships have dropped anchor hoping for cargoes as have done all old vessels earmarked to be sold. However, the crisis has fully frozen the second-hand ship market, and the low prices and the global oversupply of iron make scrap no longer an option.According to unofficial reports, Navibulgar has suspended about half of its fleet.The crisis will force many of the region’s shipping companies to stop operations or abandon ships, while others will have to sell for scrap and lay off sailors from inefficient vessels, market sources have said.More than 1100 vessels have dropped anchor in the Black Sea region, which is double the usual numbers.

Over 70 brands to present the best of the best at 3rd Lux only show in Sofia

 

More than 70 brands will present the best of the best in various spheres at the third Lux only exhibition at Inter Expo Centre in Sofia, the organizers said on Wednesday. The event opened with a fund-raising auction in the evening. This year the highlight of the exhibition will be Bulgarian accomplishments. Replicas of several Bulgarian treasures provided by the National Museum of History will be on display at Inter Expo Centre. The 100 exhibits include jewels from Antiquity, the Middle Ages and the National Revival Period, discovered during archaeological excavations in the land of Bulgaria.The exhibits include a Boesendorfer grand piano inlaid with 8,000 handcrafted Swarovski crystals, worth 269,995 leva. Lux only 2008 will also feature other renowned international companies for musical instruments, sound equipment, light effects and accessories.The most expensive mobile telephone GoldVish, made of at least 15 grammes of 18-carat gold, will be displayed for the first time in Bulgaria. A game called "Recognize the fake one, win the original" is organized for visitors. The winner will be awarded a mobile phone.The organizers have prepared an airplane flight for those who want to see Sofia from above. Yachts, luxury interior decorations and expensive weapons are also among the exhibits.The exhibition will be on until December 7. More than 320 million people across the world will be able to see what is happening at the exhibition thanks to the media partner Lux TV.

 

 

 

The State becomes owner of "Toplofikatsiya Sofia"

The government increased the capital of the Bulgarian energy holding by 400 million levs. The State will acquire nearly 63 000 shares of "Toplofikatsiya Sofia" AD for free and in this way will become a 100% owner of the company.The 400 million levs will be disbursed by the Economy Ministry and will be used for the purchase of the shares of Toplofikatsiya.The Sofia company produces over 1 billion kilowatt hours electric energy and currently renders services to over 400 000 households in the capital."Toplofikatsita Sofia" AD is the biggest central heating company in the country.We remind you that on November 13 municipal advisors voted on the transfer of the shares of "Toplofikatsiya Sofia" to the state.

 

Ericsson opens new logistics centre in Bulgaria

Despite the ongoing financial and economic crisis, Ericsson announced the opening of its new logistics centre in Bulgaria on December 3 2008, a company statement said on December 4 2008.Ericsson's Central Order Desk will cover 11 countries from South-Eastern Europe by processing 65 per cent of all orders to the company and coordinating 100 per cent of all complaints.“We are convinced that the telecommunication sector in Bulgaria will develop with high speed  and with the new centre we want to reaffirm Ericsson's position as a sector leader” Aurelio Calicchia, managing director of Ericsson Telecommunications Bulgaria said in the statement.The company has been present on Bulgarian market for the past 15 years. Among its main clients are all three Bulgarian mobile phone operators and a number of Government institutions.

BTC sells broadcasting operations to Austria's ORS

Bulgarian Telecommunications Company AD, (BTC), listed on the Bulgaria Stock Exchange, has agreed to sell its broadcasting operation - National Unit Radio and TV Systems (NURTS), to Oesterreichische Rundfunksender GmbH & Co KG (ORS), the company said yesterday. The purchaser is a major strategic EU investor operating in the broadcasting business. ORS has been selected through a competitive international tender. The closing of this transaction is expected after receiving the approval of the relevant regulatory authorities.NURTS is the leading provider of radio and television broadcasting services through its network of over 800 strategically located sites covering nearly 100% of the Bulgarian territory. The company offers a nationwide microwave transmission network carrying TV, radio, voice and data transmissions, provides collocation services and manages a state-of-the art satellite teleport. Since 2006 NURTS has been developing the Sofia experimental DVB-T multiplex. NURTS was until now a division within BTC group.NURTS' broadcasting business was considered as a non-core activity for BTC, the CEO of the company Bernard Moscheni said. In accordance with our strategic plan, the disposal of NURTS will allow us to better focus on our core activities: fixed, mobile and data services. We are delighted to have ORS as a strategic investor that will provide the know-how and necessary investment to bring NURTS into the digital broadcasting age. NURTS' clients and ultimately the Bulgaria will benefit from new services." NURTS is currently well positioned in the analogue radio and television broadcasting business and is therefore well placed to play a leading role in the migration to digital broadcasting in Bulgaria, according to ORS' CEO Michael Wagenhofer. The international investment bank Lazard has advised BTC on this transaction and Vienna Capital Partners acted as advisor to ORS.

Italy's Enel gets regulatory approval to buy 13 wind farm companies in Bulgaria

 

The Bulgarian competition regulator said on Thursday it allowed Italian power company Enel to acquire 13 subsidiaries of Danish-owned Global Wind Power Bulgaria for an undisclosed sum. Earlier this year, Enel agreed to buy 100% of each of the companies, which were set up to build and operate wind farms, through its subsidiary, Enel Green Power Bulgaria, the Commission for Protection of Competition (CPC) said. The companies will have a small market share due to the low stake of alternative energy in total energy production in Bulgaria, CPC said in a statement. The concentration will have an insignificant impact on the market, CPC said. Enel has two wind power projects in Bulgaria. The group, which owns coal-fired power plant Enel Maritsa East 3, has also expressed its interest in building solar parks in the country. Bulgaria, which joined the European Union in 2007, should generate at least 12% of its electricity from renewable sources by 2010 and 16% by 2020 under agreements with the union. At present, the share of renewable energy produced in Bulgaria is around five percent and almost all of it is generated by hydropower plants.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:

 

 

Together against crisis

 

The “Together Against the Crisis” discussion gathered representatives of the cabinet and the business to share ideas for reaction against the world financial crisis. Bulgaria’s Prime Minister Sergey Stanishev declared the government would strengthen the buffers in the frames of the planned Budget 2009 due to the financial and economic risks. About 63% of Bulgaria’s export is aimed for the European Union (EU) and there is no chance for the crisis to skip Bulgaria’s economy. Some slowdown in the export and the direct foreign investments is expected, as well as growth in the unemployment rate, PM Stanishev remarked. Minister of Labor and Social Policy, Emiliya Maslarova, plans to propose to the ruling coalition on Friday to increase the unemployment compensations. She explained that there is need to provide higher compensations to the unemployed, who pay their social and health securities regularly and who manage big households. There is no investors’ outflow in Bulgaria, Minister of Economy and Energy Petar Dimitrov said. He was explicit that the conditions for getting credits must be facilitated, and the speed of the economic growth has to be preserved. Minister Dimitrov prognosticated that it is possible for some companies to go bankrupt.“We appreciate government’s efforts. We are confused by the fact that results are not always adequate to what has been done”, said Bozhidar Bozhinov, chairperson of the Bulgarian Chamber of Commerce and Industry. In his words, the exchange trade in the country has to be stirred up.The Bulgarian Industrial Capital Association, on the other hand, pointed out that the crisis is developing too fast, as in early October there was demand of labor force, while now the companies started to slash many jobs. Deputy Prime Minister in charge of the EU funds, Meglena Plugchieva, offered that concrete measures for overcoming the effect of the financial crisis on Bulgaria to be introduced to the Council of Ministers in a written form and promised to examine all the proposals filed.

 

PM Stanishev: Bulgaria is in its first real capitalist crisis

 

The Bulgarian Prime Minister Sergey Stanishev stated Thursday that for the first time in its development Bulgaria was entering a real capitalist crisis.During the forum "Together against the Crisis", the Prime Minister announced he had ordered all ministries to prepare anti-crisis plans, which would be made public, and were expected to take effect in the first half of 2009."The financial crisis is creating a situation which is hard to predict but Bulgaria is relatively less affected than the EU. In the recent weeks, however, the prognoses for our main partner, the EU, have worsened", Stanishev said. He also pointed out the Bulgarian banking institutions had no liquidity problems, and no state intervention was required even though the government had the capacity to support them if needed. Stanishev reminded that the government's guarantee of all bank deposits of up to BGN 100 000 had provided financial security for 99% of all Bulgarians with money in a bank.The Prime Minister expressed the willingness of the Bulgarian government to work together with the other EU states in order to overcome the effects of the crisis as no individual economy could cope with them on its own.Thursday's forum on the financial crisis was organized by the Council of Ministers, and was also attended by the Economy Minister Dimitrov, the Labor Minister Maslarova, and the Deputy PM Plugchieva monitoring the absorption of EU funds.

Economic crisis reaches Bulgaria

Bulgaria feels strongly the global economic crisis, show the results of a snap poll conducted by the German-Bulgarian Industrial and Commercial Chamber. A total of 76 companies members of the Chamber took part in the survey. A third of them work in the service sector, 18 per cent are engaged in wholesale trade, 20 per cent are production companies, and 12 per cent are in the construction business. Sixty-seven per cent of the respondents in the poll describe the impacts of the global crisis in Bulgaria as negative while 23 per cent say the effects are strongly negative.Sixty-three per cent of the respondents say they expect sales of their companies to drop while 29 per cent expect the business to be as usual. Nearly 8 per cent even say the crisis has a positive side for the activity of their company, mostly in relocating the business of companies from more expensive places in the world to Bulgaria. Twenty-seven per cent of the respondents expect 2008 turnover to be higher than in 2007, nearly one third are bracing for stagnation, while 39 per cent fear a sharp drop in their turnover. The poll also showed that more than 80 per cent of the companies will respond to the crisis by cost-cutting while 14 per cent say they are forced to lay off people. More than half of the respondents will limit the amount of planned investments while one in eight companies has totally given up on its investment plans. The crisis will be felt in the relations with Bulgaria's biggest foreign trade partner, Germany, sources from the German-Bulgarian Industrial and Commercial Chamber said. Sixty-three per cent of the participants in the survey fear that exports to Germany will drop while nearly half of the respondents say imports will decrease. Seven out of ten companies think that the inflow of German investments will drop.The survey also showed that lending conditions worsened tangibly in the past few weeks. Three quarters of the participants in the survey say it is difficult to get loans and such are available, they are with high interest. The business expects from the government two measures: to cut taxes and to provide state guarantees to banks, the survey showed.

 

Bulgaria's textile industry expects severe blow by global financial crisis

 

Bulgaria's textile industry expects a 30-35% decrease of export orders from Europe in the first half of 2009 because of the effects of the global financial crisis.The news was announced by Valeriya Zhekova, the Chair of the Governing Board of the Bulgarian Association of Producers and Exporters of Clothes and Textile, during Wednesday's conference on the perspectives of the textile industry and the effects of the global financial crisis. According to Zhekova, the one-third reduction in export order would lead to the sacking of one-third of the workers in the textile industry, which employs about 145 000 persons in the whole country.The Association's data shows that 90% of Bulgaria's textile production is destined for exports. Over 3 000 Bulgarian firms work in the sector. one textile factory in the northern city of Pleven has already gone bankrupt as it loss its foreign clients. Another one will be closed in the northwest city of Vidin for the same reason. 150 workers will be laid off from the closure of the two plants.

 

 

 

East European economies crack, with Romania and Bulgaria the worst off

Author: The Economist print edition

Just another week’s news in eastern Europe: Latvia, after vehement denials, starts talks with the IMF; Bulgaria loses €220m ($286m) in promised payments from the European Union because of its failure to tackle corruption; and the European Bank for Reconstruction and Development cuts its growth forecast for the region by half. But the good news is that worries of a huge meltdown, from the Baltic to the Black Sea, now look overblown.The most likely outcome is several years of low or no growth, with bigger hiccups in countries that have the shakiest financial systems and biggest imbalances. The outside world (ie, the IMF, the EU and the European Central Bank) is ready to help when necessary and—more usefully—even before problems hit markets. The ECB has opened a €10 billion credit line to Poland, which saw its currency, the zloty, fall sharply earlier this month. Hungary’s central bank was even able to cut its interest rates by half a point from the 11.5% rate that it set last month, as part of a $25 billion international bail-out. And foreign banks have stood by their subsidiaries in the ex-communist countries. It was their risky lending that inflated the property bubbles, now popped, and also financed huge current-account deficits in such places as Latvia and Bulgaria. The biggest worries are now focused on Bulgaria and Romania, the poorest and worst-governed new members of the EU. The Bulgarians have their hands tied by a currency board that pegs the lev rigidly to the euro. That rules out devaluation to restore competitiveness, which is a concern as exports sag. It also removes a potential buffer, because the central bank cannot adjust interest rates. A current-account deficit worth a quarter of GDP looks alarming.At least Bulgaria’s fiscal position is strong. The state has little foreign debt and runs a budget surplus. That should allow it to increase public spending as the economy slows. It can also borrow abroad (though the authorities say they have no plans to approach the IMF). The loss of some EU money is embarrassing, but Bulgaria is still in line to get €11 billion in the years up to 2013. Oriens, a Hungarian-based merchant bank that specialises in the Balkan region, reckons that growth next year will be 2.3%: low but not awful.Romania has a current-account deficit of only 14% of GDP; a floating currency that gives it more flexibility; and is less dependent on exports to the slowing euro area than Bulgaria. But it may have a harder landing. Oriens forecasts GDP growth of just 0.9% next year. Its banking system is less profitable than Bulgaria’s. Although it is mostly foreign-owned, it looks wobblier; inter-bank rates have nearly doubled this year to 15%. Foreign reserves are scantier and the IMF reckons that the currency, the leu, may be overvalued by 19%.Thanks to populist spending in the run-up to this week’s parliamentary election, the budget deficit may reach 3.9% of GDP by the year-end. That is not a lot by some standards, but it may still cloud outsiders’ willingness to provide more cash. Whatever coalition the election produces, serious reform is a long way off. Bulgaria’s politics are also troubling. Politicians’ ties to organised crime remain scandalous; the main populist party seems to blame the country’s Turkish minority as the economy slumps. Meltdown may have been averted, but the eastern Balkans still face bleak times ahead.

 

 

 

 

 

Eastern Europe economic model flawed

Eastern European economies should brace themselves for a slowdown in growth after their business model has been exposed as weak, think-tank Vienna Institute for Economic Studies (WIIW) said, as quoted by Dnevnik daily on November 29.The economic boom experienced by the region since 2000 was based on the shaky foundation of foreign capital inflows, which has led to a drastic increase in current account deficits, the sole exception being Russia.Until recently, those disbalances were offset by foreign direct investment and loans, but the global cash squeeze is set to put an end to cheap and easily available credit, with a direct consequence of slower economic growth, the think-tank said.Four countries in the region - Estonia, Hungary, Latvia and Ukraine - faced an economic recession now that capital inflows have diminished. The rest of the countries in the region would see the growth of their economies slow down.The main risk factor, according to WIIW, was the short-term foreign debt, which in the cases of Croatia, Hungary and Latvia is as big as their entire hard currency reserves, with Romania not far behind. As refinancing opportunities disappear, those countries would find it difficult to pay back their debt on time.Another risk factor was the large share of foreign currency loans in the credit portfolio of local banks, the think-tank said. In Bulgaria, Croatia, Hungary, Latvia, Romania and Ukraine, foreign currency loans accounted for more than half of all loans given in the country.

PM: Half of EU finance ministers should be fired, Oresharski remains

 

The Bulgarian Prime Minister (PM) and leader of the Bulgarian Socialist Party (BSP) Sergey Stanishev believes that half of all Finance Ministers of countries members of the European Union (EU) must be dismissed due to the global financial crisis.Stanishev spoke before reporters on Friday and pointed out that the Bulgarian Finance Minister Plamen Oresharski was not one of those Ministers that needed to be fired.Stanishev defined the decision of the European Commission to revoke funds for Bulgaria as very serious, something that has been painful and disappointing to him.When commenting about the Opposition's request to dismiss members of the Cabinet, the PM also stated that all Ministers, Deputy Ministers and administrators were personally responsible and each of them would undergo a complex assessment.Stanishev admitted that chances to reinstate the accreditations of the Bulgarian PHARE agencies have been slim since the very beginning, but explained that the Cabinet had decided to fully mobilize their efforts instead of reconciling with the bad news in the summer.

 

Global financial crisis has only psychological effect on Bulgaria travelers

 

The global financial crisis has more of a psychological than a real effect on the demand for tourist services for the Christmas and New Year's Holidays, Vasilka Pankovska, Director Sales for one of the biggest Bulgarian tour operators "Alma Tour" reported on Monday.Pankovska spoke in a special interview for the Darik radio.She explained that the interest in faraway destinations has registered a decline, however, the closer ones have already been booked. Vacations in Tunisia, Malta, Turkey, Egypt and the European capitals are most popular among the Bulgarian clientele for this Holiday season.The packages costing between EUR 500 and 6,000 have been the ones to get booked the fastest.The company's analysis has revealed that those who have previously travelled to more expensive destinations now prefer less expensive ones. However, despite the decline, the faraway destinations have generally kept their average volume.Sales of Holiday packages in Bulgaria have shown an increase in all market sectors - winter resorts, SPA centers such as Hissar, Velingrad, Sandanski, even in hotels on the Black Sea Coast.

Projects in tourism for € 2.25 billion put on halt

 

Projects in the tourism sector in Bulgaria for nearly 4.5 b illin leva (EUR2.25 bln) have been put on halt, "Dnevnik" daily reports from its first page today. Almost all the investors admit of a slowdown in plans for construction, but only a few admit to the reasons - the serious trouble in financing the projects due to the global finnance crisis and the first time arising suspicions that there may in fact not be enough tourists to fill the new hotels. The mega-projects for skiing resorts that have benn put forward through the last few years are valued around EUR1.25 bln. The investments were explained by the big potenetioal for winter tourism in Bulgaria, with some going as far a nicknaming Bulgaria as "the Balkan Alps". Now companies have been forced to lower their expectations. Nearly EUR one bln. had been planned for investment in glf courses, mostly along the northern Black Sea coastline, aroun Kavarna, Shabla and Balchik. So far noone has pulled out from these projects but most have benn put on halt for better days. "We haven't frozen the project, but there will be a halt in construction works for the time being", the executive director of Rila Sport Slaveyko Staykov says. The company's project for 27 skiing tracks is planned to be finished by 2016.

Bulgarian wine's niche on the Russian market shrinks

 

Because of the raging global financial crisis, the wine producers in Bulgaria expect lower export rates next year, said Plamen Mollov, Chairman of the The National Vine and Wine Chamber (NVWC). The whole winemaking sector will be affected by the lower export rates, as two-thirds of the output is meant for foreign markets.The Russian market offers the largest niche for Bulgarian wines, but the consumption there has already shrunk due to the global financial crisis.Wine producers reported lower export rates over the past few months. The winemakers can tackle the negative effects of the crisis with money from the EU funds. The vine and wine sector will be subsidized with 166 million euro by 2014. Additional funds can me allotted under the EU program for development of the rural areas.

 

 

 

 

 

 

 

 

 

 

 

Bulgaria’s black market gears for rebound

The global financial doldrums will clear the way for a surge in Bulgaria’s illegal economy with oligarchies set to stir up trouble in public procurements, construction and the services sector, Rouslan Stefanov of the Center for the Study of Democracy (CSD) told a round table.A CSD survey presented at the forum revealed that the black economy has shrunk in 2008 but was yet a hefty 20 per cent of gross domestic product. The Government said the crackdown on underground economy is meant as a measure against the global economic turndown. According to NGOs, however, the action is untimely and unlikely to bear fruit. They chided the ruling coalition for their lavish investment spending set to pass through the unreformed structures that provoked anger in Brussels.The National Revenue Agency said it will miss this year’s target for VAT collection, which is the most lucrative fraud option.Economy Minister Petar Dimitrov proposed that total household consumption be supervised by a universal tax card on the alert for spending above declared income. The NRA countered the idea to set up a GPRS connection between fiscal devices and the tax authorities saying it would take much effort and time and be hardly implemented before next year’s elections.

 

Bulgaria's policy response to external shocks

Author: Radoslav Krastev, ISI Emerging Markets

 

The local economy is already facing significant external shocks from the global financial crisis and more importantly from the economic contraction in the US and Western Europe that have urged the government and the central bank to approve measures for boosting investment activities. The draft budget for 2009 envisages some fiscal loosening on the expenditure side while the central bank has taken steps to support interbank lending. However, both measures contain risks of destabilising the macroeconomic framework, which is already quite fragile in regard to the country's external position. Large external imbalances are still calling for risk averting measures rather than keeping high growth rates, as the cost of potential failure of the central bank to keep the present exchange rate peg to the euro could be very high in the long run in compassion with a temporary slowdown or recession in the real sector.The GDP growth slowed to 5.6% y/y in Q3 and 6.5% y/y in Jan-Sep from 7.1% y/y in H1, according to  flash estimates of the national statistical institute. Quite expectedly, the industry and service sectors slowed to much weaker growth rates of 4.3% y/y and 3.5% y/y in Q3, respectively, while the agricultural index surged by 37.8% on the back of one-off base effects stemming from severe weather damages in the same period last year. The economic performance in Q4 is expected to have a similar structure of steep agricultural hikes and further weakening in the industry. However, the positive base effects on the side of agricultural supplies will cease to exist as of next year while the negative external shocks in the industry and related services would further expand. This will lead to a dramatic slowdown next year. So far, the figures are consistent with our projections for a GDP growth of more than 6% this year and 3-4% next year but recent reports from business associations and companies suggest that the pace of deterioration may be
more significant. Many construction and metal processing firms have already announced plans for large downsizing of production and workforce as a result of weaker external demand. Manufacturers of car parts and investment goods are facing big difficulties. The tourist sector will also suffer from the global slowdown and the economic recession in the EU. Our growth projections for next year are based on the IMF scenario that the world economy will start to recover in H2 next year but there are growing risks that the process could be delayed until 2010. More pessimistic assumptions for the world economy could even pull down the country's growth to about 2% next year as exports of goods and services account for about two-thirds of GDP (67% in Jan-Sep). Combinations of adverse
weather shocks in the agricultural sector and inadequate policy reactions to global challenges could bring even more radical scenarios.The current account (CA) gap in the balance of payments widened by 38% y/y to EUR 5.4bn in Jan-Sep but shrank by 1.2% to EUR 536mn in September alone, according to preliminary data of the central bank. The 12-month period ending in September shows that the CA gap moderated to 23.7% of GDP from about 24% in August. However, it is not clear yet whether the narrowing will continue in the following months as the merchandise trade deficit is still rising and the balance of payments contains a large net outflow of EUR 256mn booked as errors and omissions in September that could be partly related to unregistered imports. The pace of foreign trade gap widening narrowed to 29.5% y/y in Jan-Sep from revised 31.5% y/y in Jan-Aug but remains a major concern about the country's external balance sustainability. on the trade financing side, the net inflows of FDI tumbled 42.3% y/y to EUR 315mn in September and 29% y/y to EUR 3.2bn in Jan-Sep. They covered only 60% of the CA in Jan-Sep from more than 100% in the past several years. The overall balance of payments remained on a large surplus of EUR 2.7bn in Jan-Sep but flows certainly reversed in October in views of the reported decrease in the foreign reserve accounts for the month.The worst case scenarios of very steep economic slowdown in 2009 will have large negative impacts on consumer demand and employment but potential damages from liquidity failures in the country's external balance could be even worse as they will erode the confidence in the local currency on long-term basis. The risks are quite high at present, as the country's CA deficit remains above 20% of GDP in annualised terms while the inflows of foreign direct investments (FDI) are falling at a quick pace and the stock of international reserves has moved below the value of short-term debt with remaining maturity of one and less than one year. Moreover, the prospects in the foreign trade and service accounts are quite bleak as external demand is falling at a much quicker pace than domestic demand prompting that imports will continue to outperform exports. The benefits from cheaper crude oil imports will be more than offset by the shocks in the export-oriented metal industry where the value of metal exports will be double hit by massive price and output cuts in the sector. Seasonally high imports of primary energy resources will put further pressure on the external balance in the winter months just at the time when the scope of external shocks will peak out. on top of this, the planned budget expenditure hikes at the end of the year will reduce the stock of international reserves and the government further vows to expand social transfers next year ahead of the general elections that will keep import demand for consumer goods at high level. These risk factors have been taken into account by the rating agencies and two of them, S&P and Fitch, have cut the country's credit ratings by one notch in the fall of this year. These are the first sovereign downgrades since the set-up of the currency board in 1997.The coincidence of adverse external shocks, foreign trade imbalances and global risk aversion sentiments will keep investors closely watching the central bank's international reserves in the following months. Any dramatic deterioration in the reserve adequacy ratios will force foreign creditors to reconsider their positions in the country and the recent fall in FDI inflows and withdrawal of portfolio investors from the local stock exchanged could be easily repeated by a steep decline in the foreign credit flows. The IMF guide on reserve adequacy analysis recommends full coverage of one-year debt payments to non-residents, noting that the ratio of international reserves to short-term
debt should be applied to liabilities with remaining maturity of one and less than one year. The short-term external debt reported by the central bank is still slightly lower than the stock of international reserves, but the data do not cover intercompany debts and long-term lending with remaining maturity of less than one year. Adjustments for inter-company loans and remaining maturity will thus put the country's reserve adequacy at critical levels under the IMF standards. These estimates suggest that the adequate policy response to the present external shocks should prioritise macroeconomic stability rather than aggressive growth stimulus. However, the recent decisions for loosening the bank
reserve requirements and boosting fiscal spending, including expenditure items with direct impact on consumer and import demand, suggest that the local authorities are accommodating the more hazardous approach of aggressive monetary and fiscal measures in support of economic growth.