BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT (22 – 29 MAY 2009 )
Sections/headline briefs:
MACROECONOMY:
· Bankers: Bulgaria's еconomy shrinks by 3.8%
· EIF grants €200 M to the business in Bulgaria
· Bulgaria receives over €2.666 billion from the EU
· Turmoil strikes Bulgaria’s factoring market
· Construction business hits the bottom
· World Bank forecast 3% recession for EU's former planned economies
· EU to un-freeze more money for Bulgaria
· Rose flower buyout price on decline
· Bulgaria end-March foreign debt down by EUR 418 M m/m
· Russians and scandinavians want a share in Belene Nuke
· Bulgaria signs with Austrian consortium EVN/Alpine Bau deal on Gorna Arda HydroPower Plant cascade construction
· Bulgaria ranks 50th in EIU chart for business improvement
INVESTMENTS:
· US company to build a eco energy plant in Bulgaria
· Bulgaria FDIs tower to 7% of GDP, Europe's highest
· Foreign investments in Bulgaria nosedive
· New Kostenets 60M leva paper mill opens for production
· Austria's investments in BG drop by 70%
COMPANIES:
· Winemaker Vinex powers ahead amid crisis
· Macedonian firm opens additives factory in Pernik
· Dnevnik 100: public firms shield businesses against crisis
· Autumn Plovdiv Fair to support participating companies
· Microsoft appointed Bulgarian IT company Asbis as OEM distributor
· Moody's predicts bankruptcy of firms in Bulgaria
· Eurohold touts Bulgaria’s biggest car shopping mall
· Carrefour enters Mall Pleven
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
· Growth in time of recession
· Moody's reviews ratings of Bulgaria DSK, First Investment Bank
Articles:
MACROECONOMY:
Bankers: Bulgaria's еconomy shrinks by 3.8%
Bulgaria's economy will shrink by considerable 3.8% in 2009 but in the next year it will start recovering and the GDP will increase by 0.9%, analysts from Greek bank Alpha Bank forecast, as quoted by Romanian agency Actmedia. Analysts changed their prognoses for Romania's economy in 2009 from a 0.5-percent increase to a drop of 3.1%. In the beginning of May, the EC revised its prognosis on Bulgaria's economy, as the expectations are for an economic slump of 1.6% in 2009. EC forecasts a 0.1-percent decrease in the GDP in 2010.
EIF grants €200 M to the business in Bulgaria
Bulgaria will sign an agreement with the European investment fund for the securing of a credit resource for the Bulgarian business worth 200 million euro.The official ceremony for signing the Framework and Financial agreement for implementation of the JEREMIE initiative between the government, represented by the minister of economy and energy Peter Dimitrov and the chief executive director of the European investment fund Richard Pelly will be held today in the Council of ministers’ building.The deputy prime minister Meglena Plugchieva, the minister of finance Plamen Oresharski and the executive directors of the Bulgarian bank for development Dimiter Dimitrov, Angel Gekov and Sasho Chakalski from the Bulgarian side are all invited to take part in the event.From the European Commission the representative will be Dirk Aner – general director of “Regional policy” chief directorate at the European Commission. The signing of the agreements is related to the implementation of priority axis 3 “Financial resources for development of enterprises” under Functional program “Development of the competitiveness of the Bulgarian economy” 2007-2013.The program envisages the creation of specialized financial instruments as guarantee funds, funds for risk capital and funds for micro funding, helping the access of small and medium enterprises to capital for development in accessible and favourable conditions.The agreement will secure a credit resource of nearly 200 million euro of the Bulgarian business. After the government granted 250 million euro to the business through the Bulgarian bank for development, this is practically the second most important anti-crisis measure, which will secure accessible credit conditions.The agreement is a result of difficult negotiations, which the Bulgarian side leads more than a year. Consultations with the leadership of the Bulgarian parliament have been held in order in the shortest possible terms the agreement to be ratified.
Bulgaria receives over 2.666 billion euro from the EU
According to Mrs. Meglena Plugchieva, Deputy Prime Minister in charge of the EU funds management, since 2000 Bulgaria has received over 2.666 billion euro in aid from the European Union. The sum includes financing under the pre-accession programs and, after the country's accession to the EU, the operative programs of the European Union. Calculations show that since January 1, 2007 Bulgaria has received over 1.8 billion euro EU funds. "This means that the net profit from Bulgaria's EU membership is close to one billion euro," Mrs. Plugchieva said. She assured that the funds that the country is to receive under the Sapard program would be unfrozen by the end of next month. She emphasized that only four percent of the projects under the Sapard program were problematic. Mrs. Plugchieva went on to say that the Government has spent a lot of money on audits, meant to show Brussels that Bulgaria is capable of reasonably spending the money of the EU taxpayers."We will pass to the next cabinet a good foundation for further development," Mrs. Plugchieva said in conclusion.
Turmoil strikes Bulgaria’s factoring market
The Bulgarian factoring market slowed down the growth and companies extended deferred payment periods as the global financial and economic crisis started to filter in, said Filip Genov, executive director of UniCredit Factoring. Speaking to Dnevnik about the latest trends in the segment, Genov said the cost of factoring is creeping up in lockstep with soaring interest rates on loan and leasing contracts. While growth has decelerated to between 3 and 5% a month from 20% a month in 2008, the Bulgarian factoring market has not yet unfolded its full potential and so there is room for further expansion, according to Genov. one factor for the slowdown is faltering exports and imports, which are hitting particularly hard on international factoring services. Under data of the Bulgarian National Bank (BNB), the country’s exports slumped by 23.3% year-on-year in the first quarter of 2009 and imports shrank by 29.8%. However, all players on the Bulgarian factoring market have so far managed to keep afloat. But as the crisis deepened, the average deferred payment period was extended to 65 days from about 57 days last year. The strained economic environment also started to undermine liquidity for many Bulgarian companies. From January to March, the Bulgarian economy contracted by a worse-than-expected 3.5% year-on-year, according to figures of the National Statistical Institute (NSI). As loan and leasing prices in Bulgaria went up, the cost of factoring swelled to around 0.5-1% more than the cost of a short-term business loan.
Construction business hits the bottom
After the slump in sales and prices in the construction sector, the activity of the entrepreneurs on the real estate market hit the bottom in Bulgaria and Romania in the first half of 2009. This is the conclusion of a survey for Central and East Europe made by REAS Polish consulting company and Jones Lang Lasalle. A great number of them were not prepared for the dropping demand and the withdrawal of foreign customers.
World Bank forecast 3% recession for EU's former planned economies
The economies of 10 European Union countries from the former Communist bloc would shrink by three per cent this year and stagnate around zero per cent next year, the World Bank said in a report on May 22.Hit by the recession in high-income countries, the main destination of the region's exports, and reduced capital inflows, the 10 Eastern European member states of the EU were experiencing "a sharp downturn and steep rise in unemployment because of the region’s deep trade, capital and labor market integration with the EU and the world economy," the bank said.The 10 countries - Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, Slovenia and Romania - had avoided financial meltdown, but faced uncertain prospects for growth and convergence with the rest of the EU.Still, the initial shock was over, the World Bank said, as "the rate of contraction is expected to moderate from the second quarter onwards, and growth could move into positive territory towards the end of 2009."The report highlighted some of the differences within the region, but did not give individual forecasts for each country.
EU to un-freeze more money for Bulgaria
The unblocking of the funds under SAPARD is just a step away and is very likely to happen before the end of the current government’s term, Bulgaria's Deputy PM in charge of EU funds management Meglena Plugchieva said Monday. She, along with Agriculture Minister Valeri Tsvetanov, met with the EU Agriculture and Rural Development Commissioner Mariann Fischer Boel in Brussels. The two briefed Boel on the progress Bulgaria has made following their last meeting on May 14 that discussed irregularities in funding under SAPARD programme. The European Commission unfroze in the middle of May some EUR 115 M in aid for Bulgaria in what has been seen as a pre-election image boost for the ruling Socialists. The decision for unblocking part of the funds suspended due to corruption was announced at a meeting in Brussels between EU Regional Aid Commissioner and Polish Socialist member Danuta Hubner and Bulgarian Deputy Prime Minister, Meglena Plugchieva, who was appointed to oversee the distribution of EU funds.
Rose flower buyout price on decline
The buyout price of rose flower in the region of Kazanluk is dropping because of the drought in May, the Director of the Institute of Roses, Essential and Medical Cultures Nedko Nedkov said. one kilogram of rose oil is now produced from 5 tonnes of rose flowers instead of 3 tonnes as it was last year, he explained. As of Tuesday, instead of the agreed 1.50 leva per kilogram of rose flower, the buyout price will drop by 0.20 - 0.30 leva in the various villages of the region. If rain does not fall by the end of the week it could even drop more. According to Nedkov, this year profits for producers will be much smaller because of the financial crisis. He also forecast a lower buyout price for rose oil on the international market. Last year 1 kg of Bulgarian rose oil sold for an average 5,000 euro.
Bulgaria end-March foreign debt down by EUR 418 M m/m
Bulgaria's gross foreign debt stood at EUR 36,41 B at the end of March, down by EUR 418 M over the previous month, official data showed.On an annual basis gross foreign debt, which equalled 107.4 % of gross domestic product, rose by 20,4 %, the central bank announced.Bulgaria paid a total of EUR 2,04 B to service its gross foreign debt in the first quarter, down from EUR 2,15 B for the same period the previous year.Private debt stood at EUR 3,98 B, down by 0,9 % over the moth before.Analysts have warned that Bulgaria may be the next in line after Hungary, Latvia, Serbia, Romania and Poland to seek an International Monetary Fund-led bailout over its huge private debt and bloated current account deficit.Bulgaria's gross domestic product (GDP) contracted by 3,5% in the first quarter of 2009 on an annual basis, the first time that the country's GDP marked a drop since the financial and economic crisis in 1997.The Socialist-led government, however, has persistently assured that the country is not in for nasty shocks and will not need external support from lenders such as the IMF thanks to its prudent fiscal policy.Bulgaria currently operates in currency board regime and the lev is pegged to the euro.
Russians and scandinavians want a share in Belene Nuke
Russian and Scandinavian companies want a share in Belene NPP construction project. The strategic partner of the National Electric Company (NEC) - German energy giant RWE - holds negotiations with Russian company Inter RAO and with a Scandinavian public company, NEC CEO Madrik Papazyan announced yesterday at an energy forum in the city of Varna. Mr. Papazyan did not give out the name of the Scandinavian company but he specified that the company operated two nuclear power plants in Sweden and one in Finland. The Russian company is an analogue of Bulgaria`s NEC. Inter RAO owns the power distribution network of the Russian Federation and also has several power stations outside Russia. RWE holds 49% in the Belene NPP project which it can share with one of the companies in question. The other 51% are held by NEC. The NPP project needs between 200 and 250 million euro till the financial conclusion of the contract so that the project is not suspended, stated Mr Mardik Papazyan. Presently, we are negotiating these funds because the construction project must not be stopped in any case,Mr. Papazyan added.
Bulgaria signs with Austrian consortium EVN/Alpine Bau deal on Gorna Arda HydroPower Plant cascade construction
Bulgarian Deputy Energy Minster Valentin Ivanov said state-owned Bulgarian Energy Holding (BEH) has signed with a consortium led by Austria's EVN and Alpine Bau a deal for the construction of Gorna Arda cascade of hydropower plants in which the consortium will invest 600 million euro ($838 million), local daily Klasa reported on Wednesday. The deal on the long-delayed project was signed on May 15, Klasa (www.class.bg) quoted Ivanov as saying. The Austrian consortium will replace Turkey's Construction Contracting Group (CCG) after buying its 30.1% stake in the project. The remaining stake is held by BEH.CCG was the successor to Turkey's Ceylan Holding in the project. In 1999 Bulgaria's power grid operator NEK, now part of BEH, and Turkey's Ceylan Holding formed a 69.91/30.1 joint venture to build the 175-megawatt cascade of three hydropower plants on the Gorna Arda river, in southern Bulgaria near the border with Turkey. The project was due to kick off in the autumn of 1999 but construction work never began as the bank that was to finance the Turkish part of the deal filed for insolvency. I expect works on the cascade to resume within two to three months," Ivanov said. In Bulgaria, where EVN operates as a electricity distributor supplying some 1.6 million customers, the company is also building jointly with Germany's Enertrag a 100 million euro wind farm with an initial installed capacity of 50 MW in Kavarna, in the northeast of the country. EVN is also interested in running water supply systems and in building wastewater treatment plants in Bulgaria.
Bulgaria ranks 50th in EIU chart for business improvement
An analysis by the Economist Intelligence Unit ranked Bulgaria 50th out of 82 considering the chances to improve the business environment over the next five years. The report, titled Globalization Stalled, provides an assessment of how the current global financial and economic crisis will affect the global business environment in the medium term. The main criteria used were the economic situation, as well as policies, finances and infrastructure of the countries. Global conditions for the business environment will worsen for the first time since 1996, according to the latest report of the Economist Intelligence Unit. Bulgaria’s previous score was 48th. The prospects of half of the states included in the ranking worsened in comparison to the period of 2004-2008, the report says. Neighboring Romania was ranked 48th, with a general score of 6.19 points, a little under the general average of 6.41 points. The countries with the biggest economic prospects are Finland, Singapore, Canada, Hong Kong, Switzerland, Denmark, Australia, Sweden, Norway, the Netherlands. At the bottom of the ranking are Ukraine, Cuba, Kenya, Ecuador, Nigeria, Iran, Venezuela and Angola.
INVESTMENTS:
US company to build a eco energy plant in Bulgaria
American company intends to invest 170 million US dollars in a plant for production of alternative energy from households waste in Bulgaria. An inquiry from a local company-partner of the American company has been submitted to the municipal administration for the purchase of 117 decares of land near the village of Dralfa, informed BGNES.The land is municipal and its sale should be approved by the local parliament. This will happen on the regular session of the councilors this Thursday.The investors “Doich International”intend on buying around 100 decares for the realization of other ideas related to the production of energy.The company is in fact property of the Bulgarian Bozhidar Doitchinov who lives and works in the US for already three decades. He explains that the energy will be derived from the burning of waste. According to him there is no threat of pollution, because latest technologies will be used, which reduce the pollution with several hundred times under the norms proclaimed by the EU.With the new technology the burnt gases pass through several filters. In one of them vapor is produced which could be used for heating.Because in the region of Targovishte there are no heating plants, the produced warmth will be used for vegetable green houses, which will be built near the plant.The produced energy will be around 20 megawatts per year, claims Doitchinov. To the question how the waste will be collected and processed, he responds: “The only obligation of the municipality will be to transport the waste to the plant. Thus the garbage tax can even be reduced”.The technology is modern, effective, with filtration of all types of potential polluters of the air, which the wastes contain, assures the Bulgarian owner of the American company. In addition, the need for waste depots will drop out.The company has built such plants in many other places in the world. According to the investors for the environmental clean process it can be judged even by the fact that the company has built plants in the centers of some big European capitals such as Vienna.This is another big investment in Targovishte municipality. The first was by the glass giant “Shishe Dzam”, which has already invested around 300 million US dollars.
Bulgaria FDIs tower to 7% of GDP, Europe's highest
Foreign direct investments in Bulgaria this year account for 7% of the gross domestic product, which makes it Europe's top destination for investments, the country's energy and economy minister said."Bulgaria may be battling the global economic crisis and witnessing a sharp drop in investment flows, but still it manages to retain its top position in Europe in terms of foreign investments as percentage of GDP," Petar Dimitrov said in the town of Varna.Foreign investments in Bulgaria accounted for 18% of GDP last year and results so far this year are not as bleak as expected, according to the minister.While foreign investors are interested primarily in the sector of renewable energy resources - wind generators and solar parks, local entrepreneurs are in a wait-and-see period with a stress on technology updates.Foreign direct investments, which preliminary data sets at EUR 646.6 M, covered 59,9% of the current account gap in the first quarter of the year, official data shows.Bulgaria's current account deficit continues to shrink and stood at EUR 1,078 B or 3,2% of the expected GDP in the first quarter of 2009 year-upon-year, the central bank announced.The deficit, which is Bulgaria's key economic concern, amounted to EUR 1.980 B or 5.8% of GDP during the same period a year ago.
Foreign investments in Bulgaria nosedive
“The foreign investments in Bulgaria are falling, but some investors show still interest in our market,” Economy and Energy Minister Petar Dimitrov said in the coastal city of Varna. “Most European countries have seen the ebb of foreign investments to their economies, but Bulgaria is still investment attractive,” he added.“Foreign investments in Bulgaria have shrunk to seven percent of the GDP this year from eighteen percent a year ago,” the minister went on. Bulgaria still has the highest foreign investment rate in the EU. Foreign investors are mostly interested in the development of renewable energy sources in Bulgaria, more specifically in projects for the construction of wind-farms and solar parks, and their Bulgarian colleagues are reconsidering their strategies,” Minister Dimitrov concluded.
New Kostenets 60M leva paper mill opens for production
Kostenets Paper Production officially inaugurated its new technological production line for tissue paper production – installations which have absorbed 60 million leva in investment – on May 25, Investor.bg reported.The new technology allows the firm to manufacture 90 tons in 24 hours when operating under maximum capacity or 26 000 tons annually, which is estimated to generate over three times the current sales revenue.The Kostenets plant, at the foot of the Rhodope mountain, until now has exported mainly to Slovenia and Slovakia. It has three production units, producing mainly cardboard and hygienic paper products.The improved sanitation and hygienic papers will help facilitate the firm's expansion on the market with new products and "increase its exports to the Balkans and the Middle East, as well as satisfy the Bulgarian customer at home", the report maintains.The new installation incorporates industrial gasification mechanisms, which will operate on two parallel modules with a total capacity of 34.6MW. The new process about to be launched is otherwise referred to as "combined production of thermal and electric energy".The new system is meant to facilitate the firm's complete electric and energy needs and offer, for the first time, the possibility for the realisation of the surplus energy output produced.Furthermore, Kostenets Paper Production has constructed and installed its own industrial gas pipeline spanning 11.8km, supplying a minimum of 52 million cu m of natural gas annually, of which the firm consumes 29 million cu m.With its new modern plant operational the company envisages substantial increase of output, 25 per cent reduction in energy cost per ton of paper produced, and expansion of the firm's assortment and brands for sale.
Austria's investments in BG drop by 70%
Austria's direct investments in Bulgaria dropped by 70% for the first quarter of 2009 compared to the same period of 2008 to EUR35.6 million, Michael Angerer, commercial representative of Austria in our country, commented for Pari daily. In January and February the merchandise exchange fell by 20% because of the crisis. Nevertheless, the Austrian investors are pleased with the development of the business between the two countries.
COMPANIES:
Winemaker Vinex powers ahead amid crisis
In the face of the global economic meltdown, Bulgarian winemaker Vinex Preslav continues to grow its production capacity and tap into new markets.After a hard time at the start of the year, the Bulgarian wine market is now going back to normal and the company is seeing new opportunities, said managerial agent Todor Todorov.Vinex plans to build a new capacity in the Turkish city of Kırklareli and register a new company to facilitate Polish exports.The sizeable investment cannot shake the company’s financial stability, which racked up a profit of BGN 250,000 in 2008, according to Todorov, who added that the investment is supported by a stable banking partner and consistent revenue. Stefan Pirev, Vinex chief technologist, said that the implementation of the ambitious programme might be threatened by the droughts seen in the past weeks, which could harm crops. Last year Vinex posted a revenue of BGN 15 million, the bulk of it coming from foreign markets. EU countries accounted for 45.3% of the total exports.The volumes of wine, rakiya and brandy sold on the domestic market almost doubled over the past two years. Last year the company spent EUR 200,000 on the construction of a new lab.
Macedonian firm opens additives factory in Pernik
Macedonian construction chemical additives maker Ading on Monday cut the ribbon on a new factory in Bulgaria’s northwestern town of Pernik. The EUR 400,000 unit is the company’s third and stands on a 1,800 square metres site. It has an annual production capacity of 10,000 tonnes. The completed project created 15 jobs, which are expected to double. This is the largest Macedonian investment in Bulgaria. Formed in 1969, Ading set foot on the Bulgarian market in 1997, having since participated in large-scale projects such as the renovation of the national stadium Vasil Levski and the construction of Mall of Sofia shopping centre. The company operates in Southeastern Europe, the Middle East, North Africa and the former Soviet countries.
Dnevnik 100: public firms shield businesses against crisis
The global economic turndown spared the results of Bulgaria’s public companies in 2008 but its inevitable impact was felt in the final quarter of the year.However, developments on the capital market always unfold earlier and about 80 per cent was eviscerated from the Bulgarian Stock Exchange (BSE) last year.The hardships came in the form of slowed growth and reduced profitability, showed the latest Dnevnik 100 ranking of the country’s best performing listed companies drawn up by the daily’s financial team.Last year’s runner-up, Corporate Commercial Bank (Corpbank), strode atop of the 2009 table, followed by fertiliser maker Neochim and fuel distributor Petrol.The ranking revealed that asset sales and non-core operations remain the most favourite activities of some Bulgarian managers. Such actions had a significant impact on the 2009 list, where Petrol leapfrogged to third spot after selling more than 70 filling stations and an oil facility for more than 400 million leva combined. The deal bolstered the company’s revenue and profitability and also attracted stock players and speculators, who doubled its market capitalisation and ranked its stocks among last year’s few winners.Bulgaria’s top 100 listed companies generated total revenue to the north of 17 billion leva, which speaks for more than 25 per cent of the country’s gross domestic product (GDP) for 2008 and is up 30 per cent on the previous year. The financial sector accounts for about 10 per cent of the total.But market players approached for comment by Dnevnik abandoned last year’s optimism for cautious forecasts about the Bulgarian capital market and the country’s economy.
Autumn Plovdiv Fair to support participating companies
Price discounts and special advertising packages will be offered to the exhibitors of the Technical Plovdiv Fair from September 28 to October 3. The aim is to support the participating companies as some of them come from the branches hit the most by the economic crisis. Discount in exhibition space rent on the autumn fair reaches up to 35% and there are special bonuses depending on the total space rented.
Microsoft appointed Bulgarian IT company Asbis as OEM distributor
Microsoft has signed an OEM contract with one of the leading IT distributors in the country, the company Asbis Bulgaria. The contract makes Asbis Bulgaria the distributor for Microsoft partners in Bulgaria, which assemble MS software and hardware in their products. It is the first contract of this kind signed by Bulgarian company for the last seven or eight years. According to the terms of the contract Asbis Bulgaria is authorized to sell OEM products including OS Windows, MS Office, hardware and server products. The contract is an addition to already established partnership between Microsoft and Asbis in countries as Russia, Ukraine, Belarus, Romania, Slovakia and Croatia.
Moody's predicts bankruptcy of firms in Bulgaria
The problems of the enterprises will have a negative effect on the banks in Bulgaria, experts from the international rating agency Moody's Investors Service believe.As the economy is falling into recession "the possibility of corporative bankruptcies grows" and can lead to "an increase of losses in the corporative credit portfolio of the banks", commented Elena Panayotou, analyst at Moody's and quoted by investor.bg.The overdue liabilities on consumers' credits in Bulgarian banks are expected to rise due to the increased unemployment rates and the drop of real estate prices, the agency considers.
Eurohold touts Bulgaria’s biggest car shopping mall
Holding company Eurohold Bulgaria, which recently acquired auto group Auto Union from investment fund Equest, plans to build the country’s largest new car shopping mall, supervisory board chairman Asen Hristov announced on Wednesday. The mall will be sited in the Auto Union Center, which opened near Sofia Airport a year ago accommodating showrooms of Fiat, Lancia, Alfa Romeo and Maserati and will welcome Saab and Opel as well. The deal to acquire Auto Union created Bulgaria’s largest auto group, which will sell brands ranging from Dacia to Maserati. This will streamline our operations in the midst of the global crisis,” said Hristov. Last year Eurohold sold 2,757 new car units of the Dacia, Renault, Nissan, Opel and Chevrolet makes, whereas Auto Union sold 3,920 Mazda, Fiat, Opel, Chevrolet and Alfa Romeo vehicles. The two firms have a combined market share of 12.9% and revenues of EUR 120 million. Hristov said the expanded Eurohold Bulgaria could offer the full portfolio of car services including purchase, insurance and maintenance. The company sells cars in 52 locations throughout the country, operating seven service centres in Sofia alone. Eurohold is developing new, innovative products it will launch on the Bulgarian market within a few months. Hristov predicted leasing will be back to the fore in the third or fourth quarter, giving a boost to the auto market. Asked about his projection for Eurohold’s financial performance for 2009, Hristov said the holding company will bleed no red ink, hoping it will close the year with a profit.
Carrefour enters Mall Pleven
Carrefour French retail chain signed a contract with Mall Pleven investor, the businessman Aladdin Harfan, for the supermarket in the commercial centre located on 2,400 sq. m. The French chain will open its first supermarket for Bulgaria there. The investment of the mall in the centre of Pleven amounts to over BGN 80 million. Carrefour has one operating hypermarket in Bourgas and contracts for another five countrywide.
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
Growth in time of recession
Publication: Banker Weekly English
As Banker weekly has so far written many times the statements proclaiming that banks in Bulgaria are not extending credits are all wrong. Yes, interests on loans are higher than they were a year ago but still there is some growth in the overall credits extended. For the period from March 2008 to March 2009, the volume of credits banks extended to citizens rose by 23.59% or BGN10 billion, reaching BGN49.66 billion. The most tough period - the first three months of 2009 - also marked an year-on-year increase of BGN420 million. This means only that banks keep providing loans and they are destined mainly for businesses and new homes purchases. Moreover, the share of credits into the overall volume of banks' assets was also on the rise. In March 2008 its proportion was 66.96%, while at the end of the year it came to 70.79% only to reach 71.73% three months later. So, irrespective of the international financial crisis and reduced volume of industrial production, banks can take the risk to secure financing to their clients as far as they can. Another myth is the one that interests on credits have increased dramatically. Their average annual rate rose from 10.5% to 11.1% for corporate financing in local currency, while in euro it even went down - from 8.43% to 7.39 percent. Consumer loans in levs had an average annual interest expense rate (interests and all commissions and fees) of 11.22% in March 2009, which grew to 13.44% a year later, while those in euro augmented from 10.15% to 12.20% over the same period. As far as the mortgage loans are concerned the expense rate on them grew from 9.12% to 10.38% for local currency loans and from 8.17% to 9.84% for those in euro. Whoever fails to believe these figures, may check with the National Bank's site. As for the question why these interest rates are so high the answer could be rather unpleasant for both banks and their clients. First, over the period from March 2008 to March 2009, the interests banks paid on deposits in both local currency and in euro and to both corporate structures and individuals has risen much faster than their credit interests, or - in other words - banks' profits shrank and this is obvious from the financial results published by the Central Bank. Second, regardless of the increased interests paid on deposits their volume rose significantly slower than this of the credits - by just BGN3 billion. If we look in detail into the figures for the first quarter of 2009, we will note that funds attracted from businesses diminished from BGN42.05 billion to 41.78 billion. one is left wondering how banks managed to accumulate BGN10 billion in order to increase the volume of credits extended in the period from March 2008 to March 2009. The answer is - from foreign markets. The thing is that this source has almost been exhausted and when there is low offering of certain goods (and money is goods in fact), the price goes quickly up. one more thing. People may remember how a month ago Danske Bank asked for a levs loan issuing own bonds denominated in Bulgarian currency and guaranteed by the Danish Government. The interest rate offered by the bank was 10 percent. Danske Bank has the largest possible credit rating of AAA and the bonds have been state guaranteed. What should then be the interest rate on a loan to a company active in Bulgaria, whose rating is lower than that of Danske Bank and Denmark as a whole and is thereby associated with higher risks? What is worth noting is that over the last twelve months banks divided themselves into two groups. The first one is composed of institutions which up to 2008 led extremely aggressive credit expansion policy and the share of the credits to their assets varied between 75% and 87 percent. Due to the lower volume of financial resources offered on the market, as well as the increased capital requirements and risk regulations, these banks reported lower annual credit expansion of between 13% and 25 percent. This group includes Bulgarian-American Credit Bank, UBB, DSK Bank and Piraeus Bank Bulgaria. The other group includes banks that have not been extremely active in the crediting sector, and, due to the accumulated reserves, or to the additional share capital they attracted, may now afford to extend more loans than they did in previous years. These are banks with a credit growth rate of more than 40% and among them are Corporate Bank, Societe Generale Expressbank, Emporiki Bank and the Bulgarian Development Bank. As a matter of fact, the case pertaining to Societe Generale Expressbank is slightly different. Since 2000 BANKER weekly has been publishing a quarterly list of the banks that most actively extend credits in accordance with three criteria. These are the overall volume of extended credits, its proportion to the balance sheet, as well as the credit volume's growth over the last 12 months. only institutions that fall under the first 10 in each one of the categories find place in the final list. Of course, the chart could have been more precise if we also had the chance to assess banks in terms of their bad credits and their proportion to the total volume of their credits, but, unfortunately, the National Bank does not publish such data. It is only Societe Generale Expressbank that enters in the top 10 sub-lists of all the three criteria for March 2009. The total volume of credits it extended came to BGN2.2 billion, the bulk of which - BGN1.4 billion were provided to businesses. This bank has always followed an active policy towards financing clients. In March 2008 credits accounted for 77% of its total assets, while a year later they reached 80.69 percent. The overall volume of extended credits by Societe Generale Expressbank rose by nearly 48% over the same period. The institution has a stable capital base and can count on support from its parent Societe Generale. These are the two factors vouching for its stability. Its management has been relying on a reasonable growth rate thanks to which the bank can obviously perform well in more difficult times. At the end of the day, data of the Central Bank's statistics show that in the current situation, in spite of the world financial crisis, Bulgarian banks manage to keep their stability, as well as sustain a certain credit growth. The question is how big their reserves are and will they suffice if the condition on the world markets does not improve over the next one year or if, God forbid, worsens.
Moody's reviews ratings of Bulgaria DSK, First Investment Bank
Moody's Investors Service has placed on review for possible downgrade ratings of two Bulgarian financial institutions: DSK Bank AD and First Investment Bank Ltd.With regards to DSK Bank, Moody's downgraded the bank's long-term local currency deposit rating to Baa2 from Baa1 due to the downgrade of its parent bank's (OTP Bank of Hungary) ratings. The bank has been placed on review for further downgrade.It also placed the D+ bank financial strength rating (BFSR, which maps to a Ba1 baseline credit assessment -- BCA) and the Prime-2 short-term ratings on review for possible downgrade. The Baa3/Prime-3 foreign currency deposit ratings were not affected by this action.Moody's placed on review for possible downgrade the D bank financial strength rating of First Investment Bank, Ba1 long-term local and foreign currency deposit ratings, as well as the Ba1 and Ba2 ratings for senior and subordinated debt assigned to its EMTN programme."We expect that, the weakened economic conditions in Bulgaria will have an impact on the banks' financial fundamentals, particularly their credit quality, earnings generation and capital levels," says Elena Panayiotou, Moody's lead analyst for the banks.