BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 10 – 17 APRIL 2009 )
Sections/headline briefs:
MACROECONOMY:
· IMF Mission to Visit Sofia
· Bulgaria's state budget deficit hits BGN 3.5 B
- Bulgaria PM: Financial crisis won't affect energy strategy
· Coface: Bulgaria's credit rating goes down
· Bulgarian industrial chamber to be established in May
· 309 788 property transactions in Bulgaria in 2008
· Millionaires multiply in Bulgaria despite the crisis
· Turkish companies import carcinogenic cement to Bulgaria
· Medical tourism it time of crisis
· Qatar and Bulgaria to foster economic cooperation
· Bulgarian filling stations may sell biofuels from autumn
· Bulgaria has untapped electronics potential – Frost & Sullivan
· Bulgaria’s rural areas flocked with solar power projects
· Turkey's foreign trade minister Tuzmen confers with agriculture minister Tsvetanov, opens Turkish Trade Centre in Sofia
· Bulgarian nuclear plant Belene to cost € 10 B
INVESTMENTS:
· $ 370 billionTurkish investments in Bulgaria
· Monada to recycle building waste in Bulgaria’s Rousse
· Handelsblatt: Bulgaria & the Baltic states to lose most of the German investments
· Bulgarian meat processing company Delikates 2 opens € 5.1 M factory
· Israelis intend to invest in Dobrich
COMPANIES:
· Bulgaria’s maritime fleet to give face-lift to vessels
· Japanese company is looking for 400 workers from Yambol
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
· UniCredit cautions Bulgaria of looming recession
· Bulgaria's export collapses by 28%
· Bulgaria CPI records deflation in March
· The crisis hit Sliven
· Crisis hits Bulgarian Mashstroy's sales
ANALYSIS:
· Expert: Bulgaria is Balkan tiger in software development
Articles:
MACROECONOMY:
IMF Mission to Visit Sofia
Аn IMF mission will visit Sofia April 14-22 to hold regular consultations with Bulgaria, the office of the mission in Sofia said Monday.The mission will be headed by Bas Bakker, and consist of Peter Breuer, Jianping Zhou, Jerome Vandenbussche, and Gabriel Goddard(World Bank). Tonny Lybek, IMF's Regional Representative and Ana Mihaylova from the IMF Sofia office will also participate in the meetings.The purpose of the visit, which takes place every spring, is to assess and discuss economic developments since the Article IV consultations in December.The mission is expected to disseminate its conclusions in a press statement at the end of the mission.
Bulgaria's state budget deficit hits BGN 3.5 B
Because of the spreading global financial crisis, 3.5 billion levs of the expected revenues to the Fisc will not be collected. As a result, the expenditures of the state administration will be cut down by ten percent, so as to implement this year's budget with some surplus. This is written in a special report of the International Monetary Fund on Bulgaria. IMF launched a mission aimed at collecting information on the economic situation in the country. Bulgaria IMF Mission Head Bass Bakker had a talk with Finance Minister Plamen Oresharski. The situation with the expected revenues from VAT appears to be the most complicated - the unfulfilled collections are expected to reach 3 billion levs.To compensate for the lower than expected revenues, the Bulgarian government will have to cut down this year's budgetary expenditures by 1.7 b levs, the IMF report recommends. The report reads further that state expenditures should be reduced and salary rises should be curbed, as Bulgaria's economic growth will slow down to one percent this year.
Bulgaria's state budget for this year provides an economic growth of 4.7% and a three-percent surplus, but the IMF forecasts that the economic crisis will worsen and Bulgaria's GDP will grow by only one percent. As a result, the revenues to the Budget will decrease and the government will have to activate a safeguard clause providing reduction of the ministries' expenditures by ten percent. Still, at the end of the financial year the budget surplus will be less than a billion levs (only 1.4% of the GDP), instead of the initially expected 2.19 billion levs. The global economic crisis leads to a falling demand for Bulgarian goods abroad and the number of foreign tourist to Bulgaria will be considerably smaller, IMF experts forecast. The shrinking bank crediting sector and the ebb in the flow of foreign investments to Bulgaria will lead to a falling home trade; added the falling prices of real estates and the possible increase of the share of bad credits, Bulgaria may as well expect an economic slowdown and a negative GDP growth of -3%, the IMF warns. Still the IMF praises the Bulgarian government over its prudent financial policy and recommends that the currency board should be preserved and a good budget surplus should be maintained.
Bulgaria PM: Financial crisis won't affect energy strategy
Bulgaria PM Sergey Stanishev has confirmed Sunday that Bulgaria's much awaited energy strategy will pass through parliament within days."Bulgaria's energy strategy will within days receive the approval of the Parliament," PM Stanishev said during a visit to the Thermal Power Plant (TPP) "Maritsa-Istok".He clarified that the Ministry of Environment and Waters is currently considering the project. "The global crisis will not have a long term effect on our energy," Stanishev emphasized.Meanwhile, he denied the accusations that setting up a Bulgarian energy holding did not meet EU standards, the Bulgarian daily newspaper Standart reported.The strategy has been prepared on the base of the European Commission's program documents for the energy sector.The European energy strategy has three main priorities until 2020 - to limit negative climate changes, limit the dependence of resources from outside the European Union and to provide easy access to energy for consumers.According to Bulgaria's national goals, by 2020 the country must increase the efficiency of local energy production to save EUR 6 M per year and reduce the harmful emissions by 50 million tons per year. Another goal is to increase the share of electric power produced by water sources to 16% of all electric power in Bulgaria.
Coface: Bulgaria's credit rating goes down
The international credit risk management company - Coface - has reduced Bulgaria's credit rating from A4v to B, thus making Bulgaria one of the 47 countries, whose credit ratings went down over the global crisis, investor.bg announced. The previous time Bulgaria's credit rating slid was in 2008 when from A4 it dropped to A4v and when Bulgaria became one of the "negative trend" countries that were placed under special supervision. "Bulgaria's credit rating has been reduced because it is vulnerable to the external economic shock. Despite that it has been "imported" to Bulgaria, the global crisis has made its impact and the number of delayed installment payments has already increased since the beginning of the year," Coface Bulgaria Managing Director Kamelia Popova commented. The overall growth rate of the delayed collections reached 10-20 percent end-March. The failures to pay an installment among the construction sector companies were 50 percent more.
Bulgarian industrial chamber to be established in May
Bulgarian industrial chamber will be established on 22 May in Sofia. This announced in Gabrovo the business entrepreneur Hristo Kovachki. The chamber will be oriented towards the small and medium business and will work for the preservation of the Bulgarian economy and its positioning after the end of the financial crisis, explained Kovachki. So far over 1000 companies from the country have filed applications for membership in the chamber. “We will be different from the existing in the moment similar associations with a comprehensive strategy, including the financial support of the small and medium business through the attraction of financial institutions, creation of possibilities for lobbying, judicial support, cooperation for support from the European institutions for the Bulgarian business”, explained the businessman, cited by Pulss.net. Kovachki stressed that the time had come for the men of enterprise to treat actively the politics and it was necessary the road between politics and business to be shortened.
309 788 property transactions in Bulgaria in 2008
A total of 309,788 property transactions were sealed in Bulgaria last year, the NSI and Aristo agency said. Sofia tops the chart with 40,906 deals. Next are Varna and Plovdiv with around 17,000 each. Ruse and Burgas are also in top 5 with 8,200 and 7,654 deals, respectively. Q4 was the busiest period last year with a total of 95,000 deals, while Q1 was the slowest with just 56,000. Five of the largest cities in Bulgaria account for 30% of all deals and Sofia accounts for 12-14%, which is less than in previous years. In 1999 some 19% of all transactions were in the capital city Sofia and 39% in the other five cities listed in the chart. The property markets in smaller cities have been developing rapidly in the years after 2005 and now the transactions are more equally distributed around the country. Some 21,041 new apartments in 2,939 buildings appeared on the market last year, with a total usable area of 1.644 mln square meters. In 2007 the number of new apartments on the market was 18,864, in 2006 the number was 13,270 and in 2005 - 12,059.
|
City |
Q1 |
Q2 |
Q3 |
Q4 |
2008 |
|
Sofia |
8035 |
10980 |
8866 |
13025 |
40906 |
|
Varna |
3305 |
5003 |
4159 |
5330 |
17797 |
|
Plovdiv |
3458 |
4611 |
3987 |
5031 |
17087 |
|
Ruse |
1206 |
2113 |
2297 |
2584 |
8200 |
|
Burgas |
1049 |
2030 |
2023 |
2552 |
7654 |
|
Bulgaria |
56483 |
78408 |
79545 |
95352 |
309788 |
Millionaires multiply in Bulgaria despite the crisis
In Bulgaria millionaires spring up in spite of the world financial crisis. At least forty Bulgarians have made over a million levs (1euro= 1.95 levs) for the year and dutifully declared their income to the tax inspectors. Along with the affluent Bulgarians who paid in advance their taxes in 2008, the numbers of those who have earned over a million for a year have considerably swollen. The legal millionaires for the last five years have multiplied over eight times. In 2003 five Bulgarians paid over 100,000 levs of taxes, although the tax rates were higher then. Last year four Bulgarians declared over half a million to be further submitted after they have presented their tax returns.
Turkish companies import carcinogenic cement to Bulgaria
Carcinogenic cement containing chrome with concentration 60 times exceeding the allowed is imported in Bulgaria, the Klasa Daily informs. Since the beginning of the year 13 Turkish companies have imported a total of 60 000 tons. The cheaper imported cement is mixed with Bulgarian brands in effort to keep construction costs lower. The high chrome concentrations cause allergic reactions, respiratory problems and even cancer. The cement is dangerous for workers and people who live in homes where such cement is used during the construction process. So far only the Prosecutor’s Office made inquiries into the case.
Medical tourism it time of crisis
Medical tourism is neither only treatment, nor only excursion. This strange "creation" has potential to develop, experts are trying to convince us. It appeared because of the low service prices in Bulgaria. The beneficial offer is accompanied by good quality, people from the sector point out, but the opportunities for attracting well-off patients for medical treatment in the countryare not used to the full extend. Foreigners who come to Bulgaria for medical cure stay in the country from three to seven days. Medical tourism in Bulgaria is poorly developed though the country has good specialists. The greatest number of patients in Doverie Multiprofile Hospital for Active Treatment (MHAT) is Bulgarians but foreigners increase every year. Some of our patients are also Bulgarians who live abroad permanently. They all are attracted by the prices, which are on the average by 30% lower than in their native countries, Dr. Petar Keremedchiev, executive director of Doverie MHAT pointed out for Pari Daily. Some 50 countries in the world rely on this type of tourism as part of their national industry. Bulgaria has over 600 SPA springs with total debit of 270 million litres per day. Over 75% of them are warm and hot. There are places with healing mud. This type of tourism will be stable even during the crisis as people will always need medicine care.
Qatar and Bulgaria to foster economic cooperation
Agreement for economic and technical cooperation between the Bulgarian government and the government of Qatar was signed today by the minister of economy and energy Peter Dimitrov and the minister of business and trade of Qatar Sheikh Fahad Bin Jassim Al-Thani.With the document Bulgaria and Qatar will foster the import and export of industrial and agricultural production as well as raw materials. The agreement was signed in the Bulgarian presidential building.The delegation of Qatar, led by the emir Sheikh Hamad bin Khalifa Al-Thani is on a 2-day visit in Bulgaria at the invitation of president Georgi Parvanov.
Bulgarian filling stations may sell biofuels from autumn
Bulgaria’s filling stations may launch fuels with a biofuel component from the autumn, said representatives of a working group of government and private experts tasked to draft a new renewable energy legislation. The changes are aimed at introducing real and effective control over mixing a bio component into fossil fuels, with administrative penalties for noncompliant drivers. At present, the State Agency for Metrological and Technical Surveillance (SAMTS), which should regulate the sector, has its hands tied by poor statutory rules, and the alternative fuels market is practically stalled. The bill is expected to enter Plenary Hall in mid-May, ahead of the general elections scheduled for July. “Under the government’s upbeat scenario, biofuel blends should be available at filling stations from November this year,” predicted Andrei Delchev, chairman of the Bulgarian Petroleum and Gas Association (BPGA), which unites the largest distributors on the market. He added that the bill provides a six-month grace period for filling station chains to make the necessary technical adjustments. However, biofuel producers fired fresh criticism on the government, which accepted a proposal by fuel distributor Lukoil Bulgaria to scrap the requirement to mix petrol with bioethanol. “Bioethanol production in Bulgaria will grind to a halt due to changes being prepared by economy and energy minister Petar Dimitrov and his team. It won’t be a surprise if next year the minister proposed that biofuels should be scrapped altogether,” protested Dimitar Zafirov, chairman of the industry association. Kostadinka Todorova, department head at the economy ministry, brushed off the criticism, saying that the planned changes were designed to support the sector.
Bulgaria has untapped electronics potential – Frost & Sullivan
Bulgaria offers enormous potential for electronics production, but the high inflation rate has been a major stumbling block for the sector, especially amidst the slower economic growth in the second half of 2008, according to a report of researchers Frost & Sullivan, quoted by Business Wire. Bulgarian producers should brace themselves for mixed trends in 2009, but more numerous market opportunities will emerge over the next couple of years. The global economic slowdown, which seeped into Central and Eastern Europe (CEE) in 2008, has seriously affected foreign direct investments in the Bulgarian electronics production sector, the research outfit said. But the aggressive policy pursued by the government has caught the eye of investors and the sector will enjoy substantial capital inflows in the next few years. Bulgarian ministers have lowered the minimum investment threshold, expanding the range of opportunities available to electronic investors in a region plagued by high unemployment. The analysis predicts that Bulgaria is on track to become CEE’s leader in terms of foreign investments in the coming years. The global economic turmoil has hamstrung the development of the Bulgarian electronics production sector, a trend which is likely to persist throughout this year. A further obstacle is slowing demand from key end consumers. The proximity to Romania and the other developing markets in Eastern Europe makes Bulgaria a key market in the segment. Another feather in its cap is the relatively cheap labour, according to Frost & Sullivan.
Bulgaria’s rural areas flocked with solar power projects
Bulgaria is seeing a growing interest in renewable energy, with State Fund Agriculture (SFA) receiving 24 solar plant proposals in March alone, said consultants Elana Investment, which prepare EU-financed agriculture projects. At the start of the year the fund’s payment agency opened application procedures for proposals under the measure for creation and development of micro businesses, which hands out European and national subsidies for alternative energy installations as well. Almost 200 proposals have been submitted so far, where green energy projects make a substantial part, the SFA said. Twenty-three investors have handed in 24 proposals to develop photovoltaic (PV) capacities in the sun-kissed municipalities of Stambolovo, Madjarovo, Ivailovgrad and Kaloyanovo. “Stambolovo alone offers potential for generation of nearly 3,000 MW of electricity annually, which will be enough to power the administrative buildings and the street lights in the 26 villages in the municipality,” said Kristina Tsvetanska, executive director of Elana Investments. Bulgaria’s renewable energy subsidies reach up to EUR 200,000. The incentives are quite generous, practically covering 70% of the business plan costs, according to Tsvetanska.
Turkey's foreign trade minister Tuzmen confers with agriculture minister Tsvetanov, opens Turkish Trade Centre in Sofia
Turkey's Minister of State in charge of Customs and Foreign Trade Kursat Tuzmen conferred Thursday with Agriculture and Food Minister Valeri Tsvetanov, the Ministry said in a press release. The two agreed to hold working meetings between the two countries' plant protection services to discuss the options for introducing temporary urgent measures for limiting the import of Turkish-grown potatoes in the EU. The Turkish guest noted the need to promote commercial ties between businesses in Bulgaria and Turkey to boost the trade with Bulgarian farm produce and foods in his country. The participants in the meeting also discussed opportunities for implementing joint projects and investments in farming and cooperation in the area of aquaculture and fisheries. The two ministers spoke about setting up a joint laboratory for developing fishing in the Black Sea. Also on the agenda of the talks were the exchange of experience and research in horticulture and the trade in farm machinery. Earlier on Thursday Tuzmen and Bulgaria's Deputy Energy and Economy Minister Yavor Kouyumdjiev opened a Turkish Trade Centre in Sofia. Turkey's Ambassador to Bulgaria Mehmed Gyudjuk also took part in the ceremony.Tuzmen underlined that the centre in Bulgaria will be the first of its kind and it will give a start to a project providing for the establishment of such centres in many other countries. The idea of the centre is to establish conditions for contacts and for quicker and easier settlement of trade and business relations between the two countries without any administrative obstacles.The main trade teams of both countries, the professional organizations of the exporters and companies will be represented at the centre. The state will lead these teams, however the private and non-governmental sectors will be represented as well, Tuzmen underlined. According to him, the establishment of the new centre has two goals. The first goal is to facilitate the trade contacts between the states under the conditions of financial and commercial crisis, and the second, to underline Turkey's high appreciation of Bulgaria as a partner.The current trade between Bulgaria and Turkey stands at 4,000 million US dollars and the Turkish minister expressed hope that it will reach at least 5,000 euro (between 8,000 and 9,000 dollars) within three years.
Bulgarian nuclear plant Belene to cost € 10 B
The second Bulgarian Nuclear plant Belene may cost up to EUR 10 B if the price is calculated in reference to the inflation rate in Russia.Currently, one of the contractors for the construction of the nuclear plant near the town of Belene at the river Danube shore is the Russian AtomStroyExport, and the contract with it is for UER 3,9 B, the Chair of the Bulgarian Energy Holding, Boris Petkov, said for the Pari Daily."We insist that the Bulgarian, or at least the Euro Zone inflation, is considered in calculation of the price, because they are significantly lower than the Russian one. The most favorable will be the Euro Zone inflation rate, for it was only 1,1% in January 2009", Petkov said.In Russia, the inflation rate for 2008 was 14%, and in Bulgaria - 8%. Until the end of 2009 it is expected to fall to 11% in Russia, and in Bulgaria it is not likely to exceed 4,9%, Boris Petkov added."In such an expensive project like Belene nuclear plant, every single percent will significantly affect the final price. That is why the negotiation with AtomStroyExport have lasted so long. The Russian company, though, cannot quit the project now, because they have already completed some things at the construction site and have not received their money yet", Petrov explained.In his words, finding financing is extremely difficult because of the global financial crisis. Even the German contractor RWE, which is expected to obtain 49% of the future nuclear plant, intends to take part in the project after the financial issue is solved.One of the possibilities for financing is a loan form Russia. The Russians, though, want the loan to be 100% guaranteed by Bulgaria, Petrov said. That means that the state's budget should give EUR 3 B.At that stage of the project money are provided only until the end of 2009. The financing comes from loans form EURATOM (EUR 300 M), and BNP Pariba (EUR 250 M).
INVESTMENTS:
$ 370 billionTurkish investments in Bulgaria
The Bulgarian minister of economy and energy Peter Dimitrov and the Turkish state minister on foreign trade and customs issues Kyurad Tuesmen will sign tomorrow an Agreement for the establishment of a mechanism for consultations and cooperation in the field of technical regulations, standardization, assessment of the conformity of the metrology between the government of Bulgaria and Turkey. The signing of the document will improve the cooperation between the institutes on standardization, accreditation and metrology. Minister Dimitrov and his Turkish colleague will take part in a Turkish-Bulgarian business forum which starts in Grand hotel “Sofia”. In 2008 the trade exchange between Bulgaria and Turkey surpassed $ 4 billion. Thus Turkey holds fifth place in trade exchange and is second from all Balkan states. The Turkish investment in Bulgaria till now account for $ 370 billion.
Monada to recycle building waste in Bulgaria’s Rousse
Bulgarian firm Monada has won a contract to build a construction waste treatment facility in the Danubian town of Rousse. The contractor has pledged to pump almost EUR 2 million into the installation. A buzz with construction and reconstruction activity over the past few years, Rousse spit out massive amounts of waste and quickly filled up its inert waste cells at the local landfill. The new facility is expected to save natural resources and produce a product that generates no new waste, with only 10% of construction waste unfit for recycling. Monada plans to make fractions in various sizes suitable for road construction use. Some 30% of the total feedstock will be used to generate a raw material for concrete mixtures. The production process is expected to cut transport and energy bills. The municipality will buy the products at preferential prices. The company has also committed to build and renovate playgrounds at ten kindergartens in the town. It will also build a children’s amusement park in the nearby village of Nikolovo.
Handelsblatt: Bulgaria & the Baltic states to lose most of the German investments
According to this week’s report of the German trade and investment chamber (DIHK), the German companies are reducing their budgets for external investments, informed Handelsblatt. As a result of this process the new EU members as Bulgaria, Hungary and the Baltic countries might lose most of the German investments with the share of the German companies showing interest in investing in Central and Eastern Europe to have reduced with 7 points to 30%. Meanwhile the interest in investing in the old EU member states remains unchanged. The details of the research give a clear picture. From the managers of altogether 7 000 companies included in the research, 40% plan to decrease their investments abroad. Hardly 17% have claimed that they plan to increase their international lay out. For the first time in the history of this research the share of the managers planning restriction of their foreign investments is higher than that of the managers who plan to increase their exposition to external markets. The average level of the companies planning to shrink their investments since the research started being conducted in 1995 is 23%.The chief economist of DIHL Folker Treier believes that the trends among the German companies for going out on the international markets “at least for a while will slow down”.The German investments in Russia, China and other Asian countries will also drop down but to a less extent than in Central and Eastern Europe’ countries.
Bulgarian meat processing company Delikates 2 opens € 5.1 M factory
Bulgarian meat processing company Delikates 2 said it has invested 10 million levs ($6.81 million/5.1 million euro) in a new factory which it opened in Zhitnitsa, near the country's second biggest city of Plovdiv, on Monday. The factory covers an area of 5,500 sq m and will have a daily capacity of 44 tonnes of sausages, Delikates 2 said in a statement published on its website last week. The new factory will help the company meet high demand and increase its exports to the European Union, Delikates 2 said. Delikates 2, established in 1995, employs 120 people and is based in Zhitnitsa.
Israelis intend to invest in Dobrich
The Israeli company AFI Europe has expressed interest in the business zone in Dobrich. This was announced after a meeting between the mayor of the town Detelina Nikolova and representatives of the Israeli company, informed Darik radio. The executive director of the company Shimon Ben Hamo and Tsahi Tabakman and the executive director of “Business park Varna” took part in the meeting. The guests visited business zone Dobrich in order to get acquainted with the conditions and the possibilities for business in the regional town. Last month AFI Europe opened officially its third office building within the business park.The visit of the Israeli investors is conducted a month after the visit of the ambassador of Israel Noah Gal Gendler in Dobrich. The Israeli company is a leader in the development and investments in real estate and infrastructure in Central and Eastern Europe. The company deals with purchase, renovation, management, maintenance and sale of real estate as well as with projects in the field of trade centers, big office centers, luxurious residential buildings, business and logistic parks.The headquarters of the AFI Europe is in Netherlands.
COMPANIES:
Bulgaria’s maritime fleet to give face-lift to vessels
Bulgaria’s national maritime fleet operator Navigation Maritime Bulgare (Navibulgar) will buy ten ships, said executive director Hristo Donev, adding the firm will wait until the market settles. Donev explained the company is looking for a financial institution to bankroll the purchase. Navibulgar will seek second-hand vessels of 32,000 gross registered tones, and the deal will most probably involve selling some of its scrapped ships, according to Donev. Despite the global economic slowdown, Navibulgar will escape a loss this year, Donev predicted. He said positive financial results have already been registered for the first quarter of 2009 and there are signs the market is getting back on track. Navibulgar’s fleet now numbers 60 vessels, of which more than half it says are in a very good condition. The most ambitious goal of the company’s new owner is to buy two ships of 200,000 tonnes to carry ore from India to Africa. Navibulgar plans to buy at least ten 34,000-tonne ships over the next few years and another nine 21-25,000-tonne vessels, said supervisory board chairman Kiril Domuschiev. The aim would be to the cut the total age of the fleet, meeting one of banking creditors’ requirements, he added.
Japanese company is looking for 400 workers from Yambol
Despite the crisis a Japanese company in the Bulgarian town of Yambol is looking for 400 workers. “Yazaki” company which produces cables for “Renault” cars has already appointed over 2500 people for less than two years. For several days the Japanese are constantly placing job announcement for new employees from Yambol, Sliven and the whole region. Free transport and food are provided, writes Sliven.info. The minimal wage in the plant s 175 euro. The first two weeks the enterprise pays the training of the future workers.The local government in Tundja municipality which comprises of 40 villages around Yambol has called the village mayors with a request to search for people to work in “Yazaki”. Meanwhile the town of Sliven is covered with brochures of the company. However, there are not many people interested in working in the plant.
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
UniCredit cautions Bulgaria of looming recession
Italian bank UniCredit Group has revised to negative its growth forecasts for the six southeast European economies, according to the group’s latest report quoted by news outfit SeeNews. In mid-February, the banking group said that the economies of Bulgaria, Bosnia and Herzegovina, Croatia, Romania, Serbia and Slovenia will expand by less than 2.5% in 2009. According to the analysts, it seems that the Bulgarian economy is headed for a recession this year against the backdrop of an expected massive slump in capital investment. But the silver lining of the rapid slowdown in domestic demand is that it would reduce the current account gap and slow down the inflation, the report forecasts. on the political front, the key focus will be on parliamentary elections scheduled for early July, with the opposition “in a slight lead”, according to the report. UniCredit sees real gross domestic product (GDP) growth at - 3% and - 0.9% in 2010.The current account deficit is expected to be –0.4% this year and -1.5% the next. Foreign direct investment (FDI) will make 7.5% of GDP in 2009, falling to 6% in 2010.The inflation is seen decelerating to 3.5% from 12.4% last year and further to 1.8% in 2010. The unemployment rate is expected to soar to a double-digit 10.2% in 2009 and 12% in 2010.
Bulgaria's export collapses by 28%
As a result of the global financial crisis, the demand for Bulgarian goods on the international markets has shrunk drastically. The country's export rate has slumped by 27,7% and in January it was only 1.57 billion levs, according to information of the National Statistical Institute. The export rates of the EU countries have fallen by 20,5%.
As the home market is also shrinking and the companies are shutting down some of their capacities, the import of the raw materials for the industry has shrunk by about 55%.
For example, the import of mineral oils and fuels fell by 53% in January, compared to the same period of last year. With the only exception of food products, the import of all other goods is shrinking. As a result, the country's import rate shrunk by 33% to 2.38 billion levs. The foreign trade deficit has also shrank to 680,7 million levs.
Bulgaria CPI records deflation in March
Year-on-year inflation in Bulgaria fell to 4.9 per cent in March after the consumer price index (CPI) recorded a decline for the fifth time in 10 months, National Statistical Institute (NSI) data showed on April 14.Prices fell by 0.2 per cent in March, compared with a 0.1 per cent increase the previous month. Food prices were down 0.1 per cent and service prices fell by 0.7 per cent 0.3 per cent, respectively, while non-food prices were 0.1 per cent up.Harmonised CPI, the figure calculated by the statistics board for comparison with inflation in the European Union, recorded a slightly larger decrease of 0.3 per cent, while the year-on-year figure fell to four per cent.Bulgaria's Cabinet targets an annual inflation of 5.8 per cent on the expectations of reduced consumption as the global financial crisis will become increasingly felt in the country. For the first quarter of the year, inflation was 0.6 per cent.A faster drop in inflation would eliminate Bulgaria's main obstacle towards adopting the euro, although it would not guarantee a faster process.
In 2008, inflation was 7.8 per cent, below the eight per cent estimates announced by the Finance Ministry and Bulgarian National Bank in the summer, and well short of the 12.5 per cent figure recorded in 2007.
The crisis hit Sliven
The most affected by the crisis in the region of Sliven are the workers from the plant for metal-cutting machines.50 more people have received notifications for dismissal. Thus the number of the people who lost their jobs is over 90, informed the Bulgarian national radio. The remaining 320 workers are on a 4-hour working day because the enterprise has no orders.The plant in Sliven didn’t succeed to qualify for compensation from the state because of the large number of its employees and because the decree doesn’t provide for partial funding.According to the chairman of the regional organization of the Confederation of labor “Podkrepa” Emil Petkov, the crisis in the region of Sliven starts being felt very clearly. Over 30 employees in another plant in Sliven “VINI” AD are expected to remain without work. There are still no tailoring factories that have closed but all of them face difficulties because of a lack of orders. Except for the fired in the beginning of the year 100 workers the biggest textile enterprise in the region “Mirolio” works on the received orders on a full time with all its workers.
Crisis hits Bulgarian Mashstroy's sales
The global economic downturn slashed the first-quarter 2009 sales of Bulgarian export-oriented machine builder Mashstroy (BSE:4MO) by 45% year-on-year to BGN 2.3 million (USD 1.5m/EUR 1.2m), the company said in a filing to the Bulgarian Stock Exchange-Sofia where it is listed. Expenses by nature fell at a slower pace of 42% to BGN 2.456 million, plunging the company to a BGN-35,000-loss for January to March 2009 from a BGN-80,000-profit in the comparable year-ago period. Dwindling sales and production had the management cut payroll, the financial report showed. Operating cash flow worsened to a negative BGN 202,000 in the first quarter of 2009 from a positive BGN 928,000 a year earlier. Mashstroy is majority owned by metal-cutting group ZMM Bulgaria Holding, itself owned by Industrial Holding Bulgaria.
ANALYSIS:
Expert: Bulgaria is Balkan tiger in software development
Author: Nicholas Jeffery, telecoms media and technology Senior Strategy Advisor at EBRD
Leading up to the financial crash, the European Bank for Reconstruction and Development (EBRD) was updating its new Telecoms Media and Technology strategy for the 30 countries it serves across SEE and CEE from the border of the Czech Republic to Mongolia. The business unit was re-inventing itself to focus a good proportion of its investments on the media and services sector. It is always a difficult challenge to balance the Bank's mandate of reconstruction and development with investing in companies with proven profitability. Investing in media and content providers, who are often in the first stage of development, is especially challenging as these investments are usually more appropriate for Venture Capital and Private Equity boutiques who traditionally provide a more hands on approach. The EBRD investment team has seen a significant shift away from telecoms and the large fixed line privatisations of the last decade, although a few laggards remain, towards a more traffic generating/service provision and applications environment for its investment opportunities. "It is fair to say that the Eastern European markets have a second mover advantage, not having to justify continued investment into first generation legacy systems such as WAP but instead concentrating on application development for 3G platforms such as Google Android. This gives the region the ability to leapfrog over first generation technology having the experience of the more ICT developed countries. It is the "Moore's law" principle in action - every year technology gets smaller, cheaper and faster," said Nicholas Jeffery, EBRD's telecoms media and technology Senior Strategy Advisor who has spend nearly 30 years as an entrepreneur in the industry. In the wake of the fall of communism, there has been a substantial brain drain from Eastern Europe to Silicon Valley for bright young graduates as opportunities for them in their home markets were limited. However, the EBRD sees this trend slowly reversing as the salary differentials narrow and quality of life and individuals' home roots come into play as important parts of one's career choice.As you look around the world, geographies have defined themselves in the technology market as being known for something: California is the application development center of the world, India (Mumbai) is the call center magnet (which we are seeing a reversal of trends) and Bulgaria is becoming one of the premiere software development centers of the world.HP, CSC and most of the mobile operators of the world know exactly what Bulgaria has to offer and as one of the newest entrants into the EU with a planned accession into the European Community by 2010, the Bulgarians appear to be bucking a trend as investments are still being made even during the last six months. This against a regional backdrop from the Economist Intelligence Unit benchmarking study published on the 18th of February 2009, where they show that from November 2008 to February 2009, the number of companies in Central and Eastern Europe who plan to cut their investment in the region has risen from 16% to 21%. Bulgaria is also attracting the more esoteric and creative application developers such as ViaOne, a US based corporation recently funded by the EBRD who have created mobile roaming cost saving, mobile wallet and money transfer applications as part of a wider suite of applications such as Voice over Internet Protocol targeted at the small to medium enterprise business markets. Another example of Intellectual Property moving into Bulgaria is Lightapp, a UK high tech company who has developed a method of delivering business and home computing applications on a per use model via a set top box to a digital TV, at a fraction of the cost of a PC and traditional software licence fee.Software development companies that have been created in Bulgaria and are now taking on the world are business like Fadata, serving the International insurance markets with their risk analysis software, and Teracomm who has developed a suit of eight product lines from mobile TV and mobile marketing applications to 3G video calling and streaming for the world mobile operators. Teracomm, whose clients range from Vodafone and T-Mobile to Universal Music and Adidas, are developing killer applications and competing and winning in Western Europe, the USA, Asia Pacific and nearer to home in Hungary and other CIS and CEE countries. And then came the financial crisis, hitting with effects that are much more severe and deeper than originally anticipated. But they say that every gray cloud has a silver lining. This crisis is a chance to re-think the EBRD's transition priorities as it invest in 2009 and moves towards defining its strategies for the next five years. The EBRD needs to embrace the challenges ahead through taking a fresh approach to how it works and achieves its goals. Because the EBRD is needed more than ever, the bank must ensure that it remains equipped to address the challenges as they unfold. EBRD's targets for 2009 are necessary and at the same time ambitious with a target of Euro 7 billion of investment. The bank is under no illusion that finding and financing good projects will be easy as the bank strives for higher business volumes. EBRD will need to look at new projects in light of the crisis, to be more creative, flexible and act decisively and with speed. "EBRD's flexibility in tackling the financial crisis effects means that despite the financial turmoil, Bulgaria can continue to build upon its growing reputation as a center of software development globally. During these difficult times, it is excellent to see a country like Bulgaria clearly setting out how it can support inward bound technology companies and investment to maximize the ICT talent that is abundant in the country. Watch out for the Bulgaria the "Balkan Tiger," said Nicholas Jeffery.About EBRD: EBRD is the single biggest investor in the region including Central and Eastern Europe and Central Asia, investing in 30 countries. Founded in 1991 in the wake of the fall of communism, EBRD is owned by 61 countries and two intergovernmental institutions and focuses on supporting private sector investment in its countries of operation. EBRD's Telecom, Media and Technology investment team is based in London, with representation at the country level, and has over 15 dedicated bankers. The team invests in and provides financing to a variety of companies from basic communication infrastructure provision to software and content.