BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 8 – 15 MAY 2009 )
Sections/headline briefs:
MACROECONOMY:
· Bulgarian, South Korean speakers discuss relations, parliamentary cooperation
· South Korea company builds $ 20 M industrial park in Bulgaria
· Chinese firm to build car factory near Lovech
· Bulgaria’s auto market tumbles by new 50% Jan-Apr 2009
· Bulgaria IT sector records 15% sales increase in 2008
· Bulgaria fiscal reserve shrinks by 4.2% in March
· CED: Economic growth in 2009 will be between -1 and -2%
· Bulgaria invited to Iraq’s post-war development
INVESTMENTS:
· Solar park to be built on Kremikovtzi’s terrain
· Sinergon invests € 3 M in a factory Vetrocom begin wind park construction
· Vetrocom begin wind park construction
· Leaning tower to be built in Sofia
COMPANIES:
· IT companies report 40% average net profit hike last year
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
· International Plovdiv Fair to feature anti-crisis programs
· EC forecasts recession for Bulgaria
· Economic crisis plunges Bulgaria’s industry into deeper mire
· Bulgaria recovers first from the crisis
Articles:
MACROECONOMY:
Bulgarian, South Korean speakers discuss relations, parliamentary cooperation
The chairman of the National Assembly, Georgi Pirinski, met on Tuesday, 12 May with the Speaker of the National Assembly of the Republic of Korea, Mr. Kim Hyong-o, and the parliamentary delegation he is leading. The delegation is paying a three-day visit to Bulgaria. Emerging from the meeting, Pirinski told journalists that the forthcoming Expo 2012 in Korea is an appropriate opportunity for the development of relations between the two countries. He pointed out that next year will see the 20th anniversary of the establishment of diplomatic relations between the two countries. The official visit of President Georgi Purvanov to the Republic of Korea this fall will be an important step in the further boosting of relations, Pirinski added. Kim Hyong-o expressed gratitude for the invitation and noted that they had discussed comprehensively cooperation between the two parliaments. The speaker of the Korean National Assembly hailed Bulgaria's decision to participate in Expo 2012.
South Korea company builds $ 20 M industrial park in Bulgaria
South Korean Choice Consortium will build a USD 20 M industrial park near the Bulgarian city of Pernik.The contract was signed by Pernik mayor, Rositza Yanakieva, and Choice's representative, John Park.The aim of the industrial park is to attract investments, lower unemployment rate, and keep young professionals in the city.The Korean Consortium chose Pernik because of the perfect geographical location and infrastructure.The construction of the park will take nearly ten years, and a total of 13 Korean companies have showed interest in investing in the project.
Chinese firm to build car factory near Lovech
China-based car manufacturer Great Wall will break ground on May 11 on a new production facility near Lovech, northern Bulgaria, news agency SeeNews reported. The project will absorb EUR 80 million, creating 1,300 jobs when it opens at the end of 2010. Local diversified group Litex Commerce will take part in the construction and the operation of the new facility. Maker of the Florid, GWPERI, Cowry, Hover, Safe and DEER brands, the Chinese company plans to manufacture the Hover passenger car and pickups in Bulgaria. The new plant will have an annual production capacity of around 30,000 units, most of them to be sold on the domestic market.
Bulgaria’s auto market tumbles by new 50% Jan-Apr 2009
New car sales in Bulgaria from slid by around 50% January to April 2009 as they did in the early months but there were also signs of a slight recovery, showed figures of the industry association of dealers and manufacturers. With sold units growing by 252 from March to 2,795, April turned into the bumper month so far in the year. However, the performance pales in comparison with the slackest month of last year, November, which saw as many as 4,185 sales deals struck. The slowdown was triggered by the ongoing economic deterioration, which prompted both households and firms to postpone car purchases. Another drag was bank’s tightened standards for loan and leasing contracts. From January to April 2009, Bulgarian auto dealers sold 9,983 new cars, lorries, motorcycles and buses against 20,119 for the same period of 2008. This represents a 50.3% contraction versus 52.8% for the first quarter of the year.The sluggish economy also pushed more people to buy smaller, cheaper cars, which generated almost a quarter of all deals in the segment, as buyers shied away from last year’s favourites of the mass middle-class models. Toyota clawed back into top position in the car segment after a 14-month break. In the ten months from February 2008, the best-selling make in Bulgaria was Opel, which surrendered its lead to Volkswagen in the first quarter of 2009. Subaru’s dealer was the only one on the car segment to improve last-year sales, registering 84 units compared with 77, backed by a much wider range.The statistics fuel fears that the crisis will strike hardest on bus and lorry dealers, which have suffered a staggering 70% decline in sales on the year-ago period. The market’s biggest lorry dealers switched positions, with Mercedes outpacing Iveco. In buses, Iveko surpassed Isuzu.
Bulgaria IT sector records 15% sales increase in 2008
Bulgarian IT companies sales increased by 15% in 2008 year-on-year.The data has been provided by the first detailed research on the Bulgarian IT sector, presented during the International IT forum, BASSCOM Days 2009.The profit of the software business has increased by 40% in 2008 year-on-year. 55% of the income comes from international contracts, and most of the sales are done in Western Europe and the US.The forum is organized by the Bulgarian Association of Software Companies (BASSCOM), and will take place May 10-13.
Bulgaria fiscal reserve shrinks by 4.2% in March
Bulgaria's fiscal reserve, which the country is required to maintain under the terms of its currency board agreement, shrank by 4.2 per cent to 7.95 billion leva in March, Finance Ministry data showed.The total decrease was 350 million leva, caused in part by the 73.9 million leva deficit to the consolidated budget, Dnevnik daily quoted the Finance Ministry as saying.Industrial parks are one of the initiatives of the Socialist-led Cabinet to fight economic slowdown in Bulgaria. Prime Minister Sergei Stanishev's stimulus package, which emphasised government investment, has been criticised by political opponents and analysts alike, who said that the measures did little to directly stimulate businesses.The Cabinet has had to dip into its reserves after first quarter Budget revenue fell by 343.7 million leva compared to the same period of 2008. But while last year by end-March the Cabinet had collected 25.2 per cent of its full-year target, in the first quarter of this year, it only managed 20.3 per cent.The International Monetary Fund has already advised Sofia to cut back its Budget spending, but the Cabinet is yet to do so. According to the chairperson of Parliament's budget and finance committee, Roumen Ovcharov, quoted by website mediapool.bg, the Socialists were in favour of setting aside 20 per cent of the funds allocated to ministries for 2009, up from 10 per cent now, to serve as a buffer against falling tax revenue. The Cabinet, however, was unlikely to completely reshuffle the Budget, he said.
CED: Economic growth in 2009 will be between -1 and -2%
According to the pessimistic forecasts of the Centre for Economic Development (CED), Bulgaria's economic growth in 2009 will be between minus 1 and minus 2 per cent, CED Co-Chair Georgi Prohaski told a news conference.The optimistic scenario envisages minimal economic growth, not more than 1 per cent.Bulgaria is already in an economic crisis and this is the first serious cyclical economic crisis since the beginning of a market economy in the country, Prohaski said.According to the other Co-Chair of the CED, Alexander Bozhkov, the fulfillment of the optimistic scenario for economic growth depends on the adequate actions of the business community and the government.Bozhkov said, however, that the optimistic scenario is merely theoretical and not feasible because of the forthcoming elections.According to Prohaski, the development of the current account deficit shows that there is no danger of an automatic collapse of the currency board arrangement. He predicted that this year there will be no worsening of the ratio between the current account deficit, the gross domestic product and foreign investment. It is possible that the current account deficit and foreign direct investment will decrease 50 per cent each. This means that in 2009 foreign investment will hardly drop below 3,000 million euro.The CED expects annual inflation to stand at 3 per cent. In this way, Prohaski said, Bulgaria could meet one of the criteria for entry into the Eurozone. The expected low inflation is the reason why CED experts do not recommend wage growth this year. In this sense, the government's policy should be directed towards support for business, and not wage growth, Prohaski said.
Bulgaria invited to Iraq’s post-war development
Iraq’s Finance Minister, Baqir Jabr al-Zubeidi, has invited Bulgarian developers to participate in the construction of homes and infrastructure in the Middle Eastern country, Standart daily reports Tuesday. In Jabr al-Zubeidi’s words, the wrong idea exists that only the big countries can participate in the implementation of projects. ‘Iraq relies on professionals from different fields and the Bulgarian experts have established a reputation of high skills and professionalism’, he told the daily The Iraqi Minister is currently on a visit to Bulgaria, during which he met with Bulgaria's Finance Minister, Plamen Oresharski. Their meeting concentrated on the possibilities for Bulgarian companies to participate in the development of tourism and agriculture in Iraq. The Iraqi delegation accompanying Jabr al-Zubeidi includes the director of the Trade Bank of Iraq and high-level civil servants responsible for Iraq's investment policies. Jabr al-Zubeidi took the opportunity to express his gratitude to Bulgaria for solving the problem with the Iraqi debt to Bulgaria, settled at the end of 2007.
INVESTMENTS:
Solar park to be built on Kremikovtzi’s terrain
Solar Park could be built on 5000 acres of Kremikovtzi’s ground with 2000 green working positions, chief expert of Confederation of Independent Trade Unions in Bulgaria (CITUB) Diana Naidenova said at a press conference, cited by FOCUS News Agency. Worked out eco project would be funded by the European Commission. It intends construction of sun collectors’ plantation as workers that would be hired will be with occupations applicable and similar to Kremikovtzi’s workers. The project is part of CITUB’s proposals for Kremikovtzi’s future.
Sinergon invests € 3 M in a factory
Sinergon Holding invested EUR 3 million in Premier Pl to make it a modern furniture factory in Pleven. The production space is 8,000 sq. m and the showroom is located on 400 sq. m. Last year the plant had BGN 3.4 million turnover. The company invests in young people ready to develop professionally. It offers 100 job positions, the equipment is German and Italian and the main emphasis is on quality.
Vetrocom begin wind park construction
Alpiq subsidiary Vetrocom Ltd. has begun construction of the 50-MW Vetrocom Wind Farm in Bulgaria's Kazanlak.Vetrocom Limited, a subsidiary of the Swiss energy group Alpiq Holding Ltd, is set to invest close to EUR 80 M over two years in a wind farm near the Bulgarian town of Kazanlak, energycurrent.com reported Wednesday.The project has created 100 permanent and temporary jobs. The Bulgarian wind farm investment is part of Alpiq's strategy to increase the share of renewable energy in its energy production.The wind farm, with total capacity of 50MW, will be equipped with 20, 25MW wind turbines from the German manufacturer Fuhrländer. The facility should launch operations at the end of 2010.Alpiq, established in early 2009 through the merger of Atel and EOS, employs over 10 000 people in 29 countries in Europe. The company specializes in electricity generation and transmission, sales, trading and energy services.
Leaning tower to be built in Sofia
ILPA Development, Bulgarian company with Belgian participation, started the construction of a unique oval office building on Tsarigradsko shosse blvd. in Sofia. Ellipse centre should be finished by 2010. The gross-floor area of the whole centre is 19,820 sq. m. The office space will occupy 10,000 sq. m. The building will be interesting with the leaning construction like that of the tower in Pisa.
COMPANIES:
IT companies report 40% average net profit hike last year
The net profit of the IT companies in the country has increased by an average of 40% last year on sales hike of 15%. Exports accounted for 55% of total sales and the main trading partners were the western European countries and the US . The companies report change in the structure of the products and services sold to foreigners from outsourcing to higher value added goods. The local IT companies have been raising the wages by 30% annually since 2006. The number of the workers rose by 13% to an average of 86 employees per company. Some 75% of the companies plan to hire new workers and 80% of the managers intend to raise the wages this year as well. Separately, an analysis of the research company International Data Corporation (IDC) showed that the share of the software piracy in the country stood at 68% last year unchanged from 2007 as compared to 71% in 2003-2005 and 69% in 2006. The EU average was 35% last year. The related losses of the software industry surged by 121% y/y to USD 139mn respectively.
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
International Plovdiv Fair to feature anti-crisis programs
Participants in the 29th International Plovdiv Spring Fair will include anti-crisis measures in their displays.The Spring Fair focuses on consumer goods and technologies and will officially open on May 12.Many of the 500 companies participating in the Fair will present their new products designed to help them deal with the worldwide recession.The companies come from a total of 21 countries while Indonesia is the official country-partner of the Spring Fair.The Fair's CEO, Ivan Sokolov, said Thursday that this is the first exhibit in Plovdiv during the times of the global crisis, something that would definitely affect the displays. Sokolov pointed out that consumer demand in Bulgaria has decreased by 32% while Bulgaria's exports are down by 27%.20 innovations will be demonstrated during the Spring Fair, 9 of them international, 4 European, and 7 Bulgarian ones.The Indonesian Ambassador to Bulgaria said that his country accepted to become partner of the Spring Fair due to Bulgaria's strategic location on the Balkans and in Southeastern Europe, making the country a gateway for Indonesian goods and products.31 Indonesian companies will present furniture, jewelry, clothes, bags, shoes, leader goods and other products and services.
EC forecasts recession for Bulgaria
The European Commission became the latest addition to the club of institutions forecasting that Bulgaria's economy will contract in 2009. The EC's economic activity forecast, which the institutions releases twice every year, estimated that the Bulgarian economy would shrink by 1.6 per cent this year and a further 0.1 per cent in 2010.The estimate, which echoes the predictions made by an International Monetary Fund mission in April, will likely add more pressure on Bulgaria's outgoing Cabinet, which has been criticised domestically for not taking the necessary measures to stave off inflation in 2008.Despite wide-spread warnings from analysts and businesses, the 2009 Budget was built on the assumption of economic growth of at least two per cent. But with tax revenues shrinking, the Government will now have to cut spending or risk missing its Budget surplus target and face a deficit for the first time in nearly a decade.Despite the expenditure-reducing contingency buffer in the budget, the general Government Budget balance is projected to deteriorate to a deficit of o.5 per cent of gross domestic product (GDP) in 2009, the EC report said. Assuming that there is no Government policy change, the budgetary outcome in 2010 would be a deficit of around 0.25 per cent of GDP."There are major downside risks to these projections, associated with a deeper and more protracted economic downturn that would result in higher-than-expected revenue shortfalls. on the expenditure side, discontinuing additional discretionary spending and exercising strict expenditure control would be crucial for the outcome in the context of scarce revenues," the report said.The projected economic downturn and the resulting weakening of domestic demand, as well as falling global commodity prices and decelerating nominal wage growth, should bring inflation down to 3.9 per cent in 2009 and 3.6 per cent 2010, from an average of 12 per cent in 2008. Future commodity market developments and the corresponding adjustment in administered prices remain crucial to the inflation outlook, the EC said.Fast growth in recent years, fuelled by foreign cash, has left Bulgaria's economy unbalanced and it was far from certain that the country's industrial sector would be able to contribute to a sustained export-based recovery, thereby helping to achieve more balanced growth, the report said.With the external imbalances persisting and foreign investment falling, the economy's external position, financed increasingly through accumulation of debt-creating liabilities, is likely to pose an additional risk to the outlook, according to the EC analysts.
Economic crisis plunges Bulgaria’s industry into deeper mire
Bulgaria’s industrial sector continued to suffer the most severe impact of the faltering global economy, with both output and sales shrinking by a double-digit figure for a third consecutive month.Preliminary data of the National Statistical Institute (NSI) showed that in March alone, industrial production shrank by 17.1 per cent year-on-year, although expanding by 7.7% on the month. Analysts give more weight to the annual figure as it gives a clearer overall picture after seasonal fluctuations have settled.Industrial turnover, which is seen as an indicator of demand, slumped by 20.7 per cent compared to March 2008. The processing industry again topped the total index of the industrial output, which rose 8.6 per cent month-on-month in March but fell by a steeper 24.1 per cent on an annual basis.Experts approached for comment by Dnevnik were not surprised at the latest figures.Lachezar Bogdanov of local think-tank Industry Watch said Bulgaria was still in the process of reverting to long-term average levels and the current slide followed logically from the whopping growth registered in 2007 and the first half of 2008.Market analysts have said that the Bulgarian industrial sector could hit the rock bottom as soon as May or June, making way for a slow recovery.But the deepening fall is prompting an increased number of warnings that the economy will slide into recession this year. Macroeconomist Dimitar Chobanov said he expected the economy to contract by between three and 3.5 per cent in 2009. The sluggish industrial sector will have the biggest impact, but some service and trade segments were also slowing down, he said.
Bulgaria recovers first from the crisis
Source: Emil Harsev, Financial analyst
Those who faced the crisis last will be first to recover from it. Bulgaria started sensing the problems a year after they were a reality in the rest of Europe and the USA. As far as Bulgaria is concerned, the crisis is a mirroring one, something which is confirmed by the economic statistics and history. Crises profiles evidence that most often than not those who are affected last are the first to convalesce. This is true also of the way the crisis has developed in Bulgaria. Bulgaria is not a participant in the drama that befell the world markets. There it had its genesis and driving motives. In Bulgaria, the blow has actually come from the reflected wave. Here the crisis has had effect mostly through the bank loans, their reduction and, of course, the naturally following shrink of demand in the global economy. Bulgarian goods are not bought, not only ours, though. Foreigners cannot buy their own goods. The Bulgarian export has decreased by 28.3% and the import, by more than 40%, according to the data of the Bulgarian National Bank. Even the slightest revival automatically restores the demand exactly in the lowest segment, that of the cheap goods, where provisionally the Bulgarian companies are situated. Because of the very nature of the demand, during the process of recovery the Bulgarian economy will be in a favourable condition.