BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 12 - 19 JUNE 2009 )
Sections/headline briefs:
MACROECONOMY:
· 600 wind generators in Northeast Bulgaria till 2015
· Bulgaria sets up industrial zones company to attract outsourcing
· Bulgarians buy new cars despite crisis
· Drought shrivels grain crop
· Agriculture and Food Minister: Grain harvest expected to be around the average, prices will go up slightly
· Bulgaria to hold tender for Targovishte Airport
· Bulgaria ranked 21 among emerging markets for retail potential
· Credits in Bulgaria register threefold downslide
· EIU: Bulgaria to ask IMF, EU for aid
· Bulgaria to receive EU funds for roads
INVESTMENTS:
· The Bulgarian state pays cash to attract investors
· EVN invests € 95 M in wind power park in Northeast Bulgaria
· Technos invests € 5 million
· 17 firms vie to build open-air mall in Bourgas
· New industrial zone in Bourgas
· Foreign investments in Bulgaria dwindle by half
· Slovenia's Mercator to invest € 80 M in Bulgaria
· € 500 000 to be invested in a new mineral water plant
COMPANIES:
· Italian group Miroglio to shut down two textile plants in Bulgaria
· Kamenitza for sale
· Carlsberg еxpects Bulgarian beer market to shrink 10% in 2009
· Eurohold Bulgaria shakes up Avto Union
- Ideal Standard Bulgaria sacks another 153 workers over crisis
· Mr.Bricolage expands into Serbia from Bulgarian division
· Lenovo adds servers to Bulgarian product portfolio
· Tokuda Bank uses profit to raise capital
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
· Crisis hits fuel market
· IMF : The peak of the crisis in Bulgaria will be this year
· FM: IMF is a Supervisor not a Charity Fund
· Hristo Pirinski: It's the right moment for Bulgaria to draw in investments
· Crisis kills export support for businesses
Articles:
MACROECONOMY:
600 wind generators in Northeast Bulgaria till 2015
Up to 1500 megawatt/hour electric energy will be produced till 2015 by the wind parks in Northeast Bulgaria and the number of the wind generators in this part of the country will reach 600. This announced the chairman of the Association of the producers of eco energy Velizar Kiryakov, cited by BNR.He visited the construction area of the wind park “St. Nikola” near Kavarna with regard to the Day of the wind, which is marked on 15 June.For this occasion the US company, which constructs the biggest in Bulgarian wind energy park announced Day of open doors.The place was visited by 150 students, parents and children.After obligatory safety instructions the visitors had a tour of the place, on which the 27th wind generator is being built as well as the construction of a 110-kilovolt sub-station.By the end of July the wind generators will be installed and by the end of the year the construction of the wind park should be completed.
Bulgaria sets up industrial zones company to attract outsourcing
Bulgaria's National Company "Industrial Zones" Jsc was formally presented Wednesday by the Economy Minister, Petar Dimitrov.The Company includes seven industrial zones around the country, and is intended to attract high-quality foreign investments, especially manufacturing operations with high added value and processing industries, according to its two CEOs, Kancho Kanchev and Plamen Radkovski.The state "Industrial Zones" company is first going to develop seven industrial zones starting with three former duty-free zones in the Danube cities of Ruse and Vidin, and the Southeast town of Svilengrad.The industrial zone in Ruse is located on a plot of 370 decares and is close to the only Danube bridge between Bulgaria and Romania; it is expected to grow to include 800 decares.The Vidin zone has an area of 308 decares, with 16 firms already operating there, and the construction of a new Danube bridge expected to be completed by the end of 2010.The Svilengrad zone has an area of 150 decares; it is located close to both Turkey and Greece, and it is going to emphasize light industry production and logistics.The fourth industrial zone will in the southern city of Plovdiv with an area of 155 decares. The northern city of Pleven will be the site of the Pleven West industrial zone with about 2 000 decares. The central Bulgarian town of Karlovo is also going to host a new industrial zone with an area of 580 decares. The land for the latter two zones is going to be provided by the Ministry of Defense.The seventh industrial zone to be developed is Varna-West, close to the Port of Varna, and with an area of 535 decares. According to Kanchev, Chinese investors have expressed interest in it.Bulgaria's Economy Minister said during the presentation of the National Company "Industrial Zones" that a total of EUR 25 B of foreign investments had come to Bulgaria over the last five years.He explained that the Industrial Zones company had received BGN 100 M from the state budget, and would also be funded through the PHARE Program with EUR 18 M, and the Operational Program "Regional Development" of the EU with another EUR 200 M.
Bulgarians buy new cars despite crisis
It appears that despite the spreading global economic crisis, the Bulgarians have enough money to buy brand new autos. on the opening day of this year?s Sofia Motor Show, dealers said they scored high sales before noon. The visitors show interest in all exhibited models and this is a pleasant surprise for us, they added. Probably, the high sales on the opening day are due to the shocking discounts (20-30 percent for most models). Dealers even offer a 50 percent discount for some models.
Drought shrivels grain crop
Farmers would get 20% lower wheat yields this year over the dry weather, Nikolay Tsenov, deputy head of the Dobrudja agricultural institute, predicted. He sees the average wheat yield at 3,000-3,100 kg per hectare and 3,500-3,700 kg for the Dobrudja region which is Bulgaria’s bread basket. Despite the smaller quantity, the grain quality will be better this year, he forecast. Rain is as scarce as hen’s teeth at only three litres per sq m in the first ten days of June against an optimal quantity of 60 litres. The situation was critical at the end of March as soil humidity was at bottom level. The drought will damage most severely the fields in southern Bulgaria, according to Tsenov. Wheat prices will start at less than BGN 260 per tonne and rise to over BGN 300 after October, said Kiril Zhendov, who chairs the union of grain producers in Dobrudja area.
Agriculture and Food Minister: Grain harvest expected to be around the average, prices will go up slightly
Compared with 2008, this year's harvest of bread and animal feed grain is expected to be around the average, prices will go up slightly, Agriculture and Food Minister Valeri Tsvetanov said in Pleven.Tsvetanov was adamant that so far there is no reason to believe there would be any "dramatic collapse" in grain sales. There will be about 3.6 - 3.8 million tonnes of bread and animal feed grain, he said.Describing the Bulgarian grain market as rather chaotic, he pointed out there is no clear logical connection between the prices of grain, flour and bread."Last year bread makers earned quite a profit," he said.On Monday Tsvetanov is going to sign a permission for one-time irrigation required because of the condition of some spring crops and orchards. An allocation of 7 million leva has been made for this purpose.The money from the EU and the national budget that have gone to agriculture this year total about 1,900 million leva. Investments paid by the EU and from the national budget in the past four years came up to some 5,000 - 6,000 million, and half of it was absorbed by the agricultural sector. Bulgarian agriculture has not seen so much money before, Tsvetanov noted adding Bulgarian agriculture had not seen so much money before.In Pleven he attended a two-day national conference dedicated to the state of the Pleven black-headed sheep breed.
Bulgaria to hold tender for Targovishte Airport
Bulgaria's government said it decided to hold a tender for the sale of an airport in Targovishte, in the north of the country. The airport has an area of 943,388 square metres and is a property of Plovdiv Airport, the government said in a statement on Wednesday. The assets that will be offered for sale include a one-floor and a two-floor buildings. Bulgarian industrial and financial group Alfa Finance Holding holds a 58.08% stake in Plovdiv Airport and the remainder is held by Bulgaria's Transport Ministry. The Targovishte airport has been closed for flights since 1998. Earlier this year Bulgaria earmarked 18 million levs ($11.9 million/9.2 million euro) of budget funds for an upgrade of Plovdiv Airport.
Bulgaria ranked 21 among emerging markets for retail potential
Bulgaria is ranked number twenty-one, while India has regained its top position in an annual rating of thirty countries' retail sector potential.Bulgaria has lost five spots in comparison with last year's AT Kearney 2009 Global Retail Development Index, a study of retail investment attractiveness among 30 emerging markets, but still ranks ahead of Romania and Croatia.The French international chain Carrefour stepped in March this year on the Bulgarian market, which is expecting the entrance of the so-called discount supermarket chains, such as Lidl, Penny Market and Plus.The authors of the index say that India's largely unmodernised retail sector remained attractive to both domestic and international retailers, in spite of government regulations that prevent 100 per cent foreign ownership of retail stores.India is followed by Russia and China.
Credits in Bulgaria register threefold downslide
Household crediting in Bulgaria has shrunk threefold, according to National Statistical Institute data. The overall distribution of household credits among Bulgarian households shows that in April 2009, every family owed the banking system 12,71 levs (1 euro = 1.95 levs), which is by three times less compared to April 2008 - 42,70 levs. Income rates on the other hand are crawling up. The average monthly wage per capita was 304,36 levs in April, which is by 8.3 percent more against the same period of last year. Nonetheless, if you subtract the accumulated inflation, the result is that Bulgarians have become by 3.3 percent for a year. The average family income is 755,83, the NSI pointed out.
EIU: Bulgaria to ask IMF, EU for aid
Given Bulgaria's large external debt and current-account deficit, the Economist Intelligence Unit (EIU) has assumed that the country will require some financial assistance from the IMF and the EU.Real GDP growth is expected to contract by 3.8% in 2009, following estimated growth of 6% in 2008, mainly because of limited access to external finance and the poor economic outlook for the euro zone, according to EIU latest forecast.Growth is forecast to rebound modestly, to 0.9%, in 2010.Inflation will continue to trend down from the high rate in 2008 as domestic demand pressures ease, food inflation drops and world oil prices remain low. Inflation is forecast to average 3.5% in 2009 and 3% in 2010.Owing to a sharp contraction in domestic demand, the analysts forecast that the current-account deficit will narrow to 13.3% of GDP in 2009 and 9.7% of GDP in 2010, from 24.1% of GDP in 2008.The Economist's analytical unit commented that the European Union will keep Bulgaria under close scrutiny, continuing to demand judicial reforms, as well as concrete results against corruption and organised crime.The experts believe that citizens for European Development of Bulgaria (CEDB), the main opposition party, will lead the government after the election due in July 2009.
Bulgaria to receive EU funds for roads
The management and control of the finances from the European Cohesive Fund for road infrastructure are completely secured after the cabinet approved a methodology for preparing the contracts with the future project executives. Road Infrastructure National Agency is ready by November of this year to approve the projects applied to secure the absorption of all EUR 501 million under this programme.
INVESTMENTS:
The Bulgarian state pays cash to attract investors
The state should begin supporting directly investors, by covering a part of the investment, so as to make the country more attractive in the conditions of a crisis, Economy and Energy Minister Peter Dimitrov said on Wednesday.He took part in a presentation of the industrial zones in thus country. In countries, such as United Kingdom and Germany, up to 50 per cent of an investment is covered by the national budget, he added."I think that this is the next step that Bulgaria should take," the Minister observed. Seven industrial zones are being built currently in the country, Dimitrov also said. The budget of the state-owned company Nationalna Kompania Indoustrialni Zoni [Industrial Zones National Company] EAD for this purpose is 100 million leva. The company was set up at the beginning of 2009 as part of the Government's measures to boost economic activities in the conditions of a crisis.
EVN invests € 95 M in wind power park in Northeast Bulgaria
The Austrian energy company EVN is going to invest EUR 95 M in the construction of a wind power park near the northeast Bulgarian town of Kavarna.The project includes 25 turbines of 2 MW each, and is expected to produce about 140 GW/h of electricity per year.The news has been announced by Kalina Trifonova, a CEO of EVN Naturkraft, which a subsidiary of EVN developing its renewable energy projects. The Kavarna project itself is 70% owned by EVN Naturkraft, and 30% owned by the German company Enertrag.According to Trifonova, as cited by the Pari Daily, the project will be completed by the end of 2010.
Technos invests € 5 million
Technos OOD announced its plan to build a plant for lifts and lifting equipment near the village of Novo selo, Veliko Tarnovo district. The five production units and the warehouse will be ready by 2010 and will open 200 job positions for the machine-engineering specialists from the region. The investment amounts to EUR 5 million.
17 firms vie to build open-air mall in Bourgas
Seventeen construction companies will join the race for main contractor on the project to build Bulgaria’s first open-air mall in the Black Sea city of Bourgas, Property Wise publication reported. The shopping centre, dubbed The Strand, will swallow over EUR 30 million. It will sprawl on 60,000 sq m and will feature 30,000 sq m of retail space, entertainment zones and a huge parking lot. The scheme fetched a building permit on June 10 and candidates to build the mall should submit price offers by June 18, the coastal city’s chief architect, Veselina Ilieva, told real estate weekly Stroitelstvo Gradat. Dimitar Kaloyanov who represents the project owner ZBS, said the price will not be the key selection criterion. Bidders will be sifted out on the basis of experience and expertise, financial stability, profits and bank guarantees. Construction works are scheduled to start next month and finish in 2010.
New industrial zone in Bourgas
The town of Bourgas on the Black sea will build a new industrial zone Sever, located on 300 decars. The project for the road infrastructure will be financed by the PHARE Programme. It will be one km long and will be ready by the end of November, 2009. The plan includes spaces for small and medium sized enterprises mainly from the light industry branches and ecology sectors.
Foreign investments in Bulgaria dwindle by half
Foreign investments in Bulgaria have shrunk by 50 percent. The direct investments amount to E955.4 M in April-January set against 1.924 M in the same period of the last year. The investments of foreign citizens in the Bulgarian realty market have dropped by 58 percent (down to 187.3 M) as compared to 446.9 M in April-January 2008. In April, the direct foreign investments amounted to BGN 5 M, i.e. 71 percent less than in April 2008. As the global crisis unfolds, the foreign companies pour less money into their Bulgarian subsidiaries where they hold shares. In the first four months of the year the net value of the investments in these companies was 178.5 M as compared to 1 billion in the same period of the last year. The heaviest investors were the Netherlands, Luxemburg and Russia. Bulgarias exports have shrunk by 32.6 percent in the first four months of the current year (down to E3.495 billion.) The balance of payments is negative and the reserve of the Bulgarian National Bank has melted down by E 1 billion.
Slovenia's Mercator to invest € 80 M in Bulgaria
Mercator, the biggest Slovenian retail chain, will open its first food hypermarket in Bulgaria. It will be in Stara Zagora. Several months later the second one will be opened in Varna. The plans of the company are to invest EUR 80 million in Bulgaria by the end of 2012 and to have 7 to 9 stores in the country located on 2-3,000 sq. m and to hold 3% market share.
€ 500 000 to be invested in a new mineral water plant
500 000 euro will be invested by “Aquabul” company in the next two years for the establishment of a new mineral water plant in Northeastern Bulgaria. The Council of ministers approved the giving on 25-year concession of part of the mineral water in region “Northeast Bulgaria”, writes “Standard” newspaper. The determined total annual exploitation resource for yielding from drilling is 94 608 m3. “Aquabul” is a company from the town of Plovdiv and is managed by Ivan Marinov, Vladimir Marinov and “K-I Invest holding” LTD. The holding develops activities in the field of logistics, distribution, agriculture, hotels, construction and medicine.
COMPANIES:
Italian group Miroglio to shut down two textile plants in Bulgaria
Italian group Miroglio will shut down two of its textile plants in Bulgaria due to sharply falling sales and disagreement among the owners, local media reported. The group will close its viscose, cotton and polyester printing and dyeing plant in Elin Pelin, close to the capital Sofia, and its viscose and polyester spinning plant in Sliven, in the southeast, run by its Bulgarian subsidiary Miroglio Bulgaria, Capital weekly reported in its latest issue quoting sources close to the Italian company. Several calls by SeeNews to the Elin Pelin plant went unanswered. Miroglio Bulgaria exports its produce to Italy, Spain, Britain, Germany and the U.S., which are among the markets most affected by the global economic downturn, Capital (www.capital.bg) reported. Its sales dropped to 106 million levs ($75.5 million/54.2 million euro) last year from 142 million levs a year ago. In early 2009 the company started restructuring its Elin Pelin plant, laying off 100 workers, and in May it cut a further 210 jobs. The staff at the Sliven factory too was reduced. Disagreement in the Miroglio family about how the group's business in Bulgaria will be run is another reason for the shutdown, according to Capital. The group (www.mirogliogroup.com) entered the Bulgarian market in 1998 and currenty runs five production units in the country, operated by three local companies. one of the Miroglio family members, Edoardo Miroglio through his majority-owned company E.Miroglio, owns a woolen textile production unit in Sliven, which is currently the country's biggest, a wool spinning and textile dyeing factory in Yambol, in the southeast, and viscose producer Svilosa ZIK in Svishtov, on the Danube River in the north. E.Miroglio's plants employ around 2,500 workers. Edoardo Miroglio also owns the Interpred business centre in Sofia, a winery in the village of Elenovo, central Bulgaria, a luxury hotel at the winery and a dairy farm in Svishtov. The Miroglio group also owns the Miroglio Nova Zagora company which runs a spinning plant in Nova Zagora, also in the southeast. While Edoardo Miroglio fully supports the group's operations in Bulgaria, the other members to the family "have other ideas", Capital reported without elaborating. The Miroglio family investments in Bulgaria so far have exceeded 350 million euro.
Kamenitza for sale
Anheuser-Busch InBev was considering the sale of its operations in Central and Eastern Europe, Belgian newspaper Le Soir reported on June 13, as quoted by Reuters.The world's largest brewer had packaged 11 breweries producing a total of 15 million hectolitres of beer a year and planned to sell it in one deal, according to the report. The breweries were in Bulgaria, Romania, Hungary, Croatia, Czech Republic, Serbia and Montenegro.Anheuser-Busch InBev is Bulgaria's second-largest beer company, with breweries in Plovdiv and Haskovo. Its biggest domestic brand is Kamenitza, but it also owns smaller brands Astika, Bourgasko and Slavena. It also sells Stella Artois, Staropramen and Beck's beer in the country.The report said the brewer no longer considered its Central European operations strategic and wanted to focus on its north and south American businesses. The company also needs cash to repay the debt it took on when InBev bought Anheuser-Busch for $52 billion last year.
Carlsberg еxpects Bulgarian beer market to shrink 10% in 2009
The Bulgarian unit of Danish brewery group Carlsberg expects that beer sales in Bulgaria may fall by around 10% this year, more sharply than the previously projected 2.0%, Sofia-based daily Monitor reported on Monday. Beer sales in the country dropped by around 8.0% in the first five months of the year, Monitor quoted Carlsberg Bulgaria CEO Alexander Grancharov as saying. A fall in beer sales is observed throughout Bulgaria, as at the seaside the drop is over 30%. The expected low tourist numbers this summer will have a devastating effect on the Bulgarian brewing industry, he added. The Bulgarian beer market is dominated by international majors Heineken, Carlsberg and InBev. Local brewers sold 5.373 million hectolitres of beer in 2008, down 2.0% year-on-year, according to data of the Union of Brewers in Bulgaria (UBB). The total volume of beer sold in the southeast European country of 7.6 million people was actually higher because the Ledenika & MM brewery, which has an estimated market share of up to 10%, is not a UBB member and its sales are not included in the union's data.
Eurohold Bulgaria shakes up Avto Union
Financial and industrial group Eurohold Bulgaria plans to restructure its newly-acquired local wholesaler and distributor of automotive products and services Avto Union by transferring its showroom next to Sofia Airport to the parent company. The proposal will be put to the vote at a June 29 general shareholders’ meeting. As part of the shake-up of its auto business, the holding company will separate from its other commercial operations the car selling and leasing activities of its auto sub-holding company, Eurohold Automotive Group. The showroom will be transferred as an in-kind contribution into a new company, Avto Union Center, which will have a capital of some BGN 40 million.
Ideal Standard Bulgaria sacks another 153 workers over crisis
Ideal Standard Vidima announced over the weekend they were planning to discharge an additional 153 workers due to the reduced production volume.40 job positions in the factory located in the town of Sevlievo will be cut in the summer - July and August while the remaining 113 will be terminated in October.Currently 662 workers from the company work shorter days with a salary of only BGN 120 per month.Ideal Standard Bulgaria is part of Ideal Standard International, which was created after the Bain Capital investment fund purchased the global "Bathroom and Kitchens" business from American Standard.
Mr.Bricolage expands into Serbia from Bulgarian division
Doverie Brico, which owns the Mr. Bricolage franchise for Bulgaria, Macedonia and Serbia, will begin its regional expansion, planning to open a flagship store outside Bulgaria in Nis, southern Serbia.Ground-breaking will take place within a week, the company said. The investor, Brico Spec, a wholly-owned subsidiary of Doverie Brico, would put nine million euro into the project.Doverie Brico opened its first Mr. Bricolage outlet in Sofia in 2000. The ten-strong store network currently spans the capital city, Plovdiv, Varna, Bourgas, Stara Zagora, Blagoevgrad, Dobrich, Pleven and Rousse, sprawling on a combined area of 60 000 square metres. Last year, the units generated a turnover of 130 million leva, according to the company’s website.Over the next few years, Doverie Brico plans to develop four more Serbian stores. Its Albanian, division, Brico Iliria, has already purchased a 24 000 sq m site in the capital city of Tirana.The first do-it-yourself (DIY) chain to set foot in Bulgaria, Mr. Bricolage competes against Germany’s Praktiker, which entered the market in 2004, and Austria’s bauMax, which stepped foot in 2008. German chain OBI has also been reported as prospecting the market for several years.
Lenovo adds servers to Bulgarian product portfolio
China’s computer heavyweight Lenovo will supply from the autumn servers in Bulgaria, expanding its current portfolio of desktop PCs and laptops.The company will also bring to the market its Value Line and Idea series and grow its service and distribution network. Lenovo recently signed Asbis Bulgaria as its second distributor for Bulgaria, where its products are also supplied by Solytron. Lenovo Bulgaria general manager Radoslav Vodenicharov said the economic downturn has slammed sales since February but the trend might turn around in the third quarter. According to Evelin Stoev, analyst with local researcher IDC, Lenovo ranked seventh on the market in terms of sales for 2008, when the best-selling brands were HP, Acer and Toshiba. IDC has estimated that Bulgaria’s computer sales grew by a paltry 3.5% from January to March, with desktop models faring better than laptops propped up by the lower prices. Stoev predicted the whole market is headed for a slide in the second quarter, with laptops also facing a decline.
Tokuda Bank uses profit to raise capital
Tokuda Bank AD will use its profit for 2008 amounting to BGN 2.487 million to increase its capital. That was the decision of the shareholders at the regular general meeting on June 12, 2009. In 2008, the bank increased its assets by 13% to BGN 340.5 million. Incomes raised by 19.86% to BGN 13.08 million. Credit portfolio also gained 36.26% compared to 2007.
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
Crisis hits fuel market
The signs of the financial crisis are already clearly seen in the real economy in Bulgaria. That inevitably triggers a drop in other key sectors, such as the fuel market. Reduced consumption first hit the EU countries, the chairman of the Bulgarian Petroleum and Gas Association (BPGA), Andrey Delchev, said. Fuel sales in Bulgaria have fallen some 4 or 5% since the beginning of the year. A market revival cannot be expected before 2010, he forecast. Fuel sales are directly connected with the condition of the economy and the transport business, which is the main reason for the poor results. The fact that fewer and fewer people can afford themselves to use their cars is also a factor for the decrease in sales, Delchev pointed out. A Pari daily's inquiry among fuel market players, however, revealed quite contradictory results. Some of the bigger chains of petrol stations denied their being any drop in sales. They even boasted of a certain increase, though smaller than planned. only Gastrade confessed that a substantial reduction in sales has been observed since the beginning of the year, exceeding 20%.Concerning the price of petrol, Delchev commented that it will most probably rise after the financial crisis dies down. The low sales prices of last autumn, however, affected the development of alternative fuels, too. In such a situation alternative products cannot compete with the low petrol prices.
IMF : The peak of the crisis in Bulgaria will be this year
The peak of the crisis in Bulgaria will be in 2009. This show the forecast of the International Monetary Fund. According to the organization’s experts this year the speed of the economic growth of the country will shrink with 2% compared to a growth of 6% in 2008. In 2010 improvement of the situation is expected and the turndown will be around 1%.Abrupt downturn will be marked by the inflation - from 12% in 2008 to 3.7% for the whole 2009. In the next year the prices will go up slowly – with 1.3% on annual basis.2009 is expected to be tough for the whole European Union – the economics will shrink with 4% and the reduction of the gross domestic product in the Eurozone will be 4.2%.Improvement is expected in 2010, when the EU countries will mark shrinking with 0.3% and the Monetary union countries – with 0.4%.Neither the EU, nor the EU zone is threatened by deflation in the next two years, prognoses the IMF. The prices in the EU will grow with an average of 0.8% for both years. For the Eurozone the inflation expectations are 0.4% for 2009 and 0.6% for 2010.
FM: IMF is a Supervisor not a Charity Fund
Mr. Oresharski, in the first quarter of the year the Bulgarian economy fell into a recession that surpassed our darkest prognoses. How long will the recession last, according to you?
Yes, the dimensions of the crisis surpassed all three prognoses of the IMF and the European Commission – that of last autumn and of January-April this year. Our prognoses were based on external surveys forecasting deterioration of the global financial climate. We were following the data submitted by the IMF and the European Commission. That is why we are now more cautious when it comes to making a prognosis as to when the crisis will end – it is not possible that Bulgaria overcomes the economic meltdown on its own, independently from the global trends. I think there will be no more slumps, but it is too early to talk of a steady recovery, despite some positive signals coming from across the ocean.
What is the forecast of the Economy Ministry about the economic growth and the inflation rate next year?
It is too early to make reliable prognoses for the next year; let’s first see what the implementation of this fiscal year will be. Given the current economic situation, with insecurity unseen for decades, I think it will be wiser if we make a prognosis about the next fiscal year in the autumn.
The National Movement for Stability and Progress suggested the signing of an agreement with the International Monetary Fund, something even the Deputy PM Ivailo Kalfin sees as possible. Do we need an agreement with the Fund?
Let me remind you that the Fund does not provede loans for either salaries, allowances, or investments. The Fund’s money is intended as a support for the fiscal reserve. I believe the levels of the fiscal reserve are acceptable and we do not need crisis financing as many other new EU members and other countries from the region did. I’d rather propose we make it with our own efforts, thanks to our own expert and resource.
The results of the MEP elections in Bulgaria were rather motley. If they are repeated at the general elections it is very likely that the formation of a Government will be difficult. Will this affect the work on the draft budget for 2010?
The possible delay in the formation of the Government will not be a favourable variant at all. A very bad situation will ensue, which will affect not only the devising of the draft budget for 2010 but much more the mobilization of the society in a situation of an economic meltdown.
Hristo Pirinski: It's the right moment for Bulgaria to draw in investments
Hristo Pirinski is a Professor of Finance in the George Washington University, Washington DC. Since 1996 he has been living in the USA and in 2001 he became a professor at the universities of Texas, New Jersey and Los Angeles. He has graduated from the St. Kliment Ohridski University in Sofia (Department of Mathematics) and acquired a Doctor's degree of the Ohio University, USA.
Mr. Pirinski, what's the specific character of the economic crisis in Bulgaria?
The crisis in Bulgaria is not a financial one. The disproportions in our country are negligible. The crisis was "imported" due to the open character of the Bulgarian economy.
Does this mean that Bulgaria will overcome the crisis faster and easier than other countries?
I am optimistic: the fact that the up-to-now economic downturn is not as all-embracing and deep as it is in the other states can be interpreted as a possibility for an easier way out of the crisis. The expected changes won't be as dramatic as they are in the USA and China.
The Bulgarian economy relies on foreign investments, so their decrease is one of the greatest concerns of Bulgarian economists and businessmen. What is to be done?
I think that this is a temporary phenomenon. Such 'mastodons' as China are moving out from the investment market. Now is the moment when we have to be more aggressive in drawing in fresh investments for Bulgaria.
How could Bulgaria harness the situation and occupy the place China has vacated?
That would be hard because we?re living in a highly competitive world.
General election in Bulgaria is only weeks away, hence a new government will run the country soon. This sends a very special message to the potential investors. How could we cope with the pre-election apprehensions?
The fact that a new cabinet will run the country is very natural in a democracy. If we put in sufficient and efficient effort for improving the business climate in Bulgaria and promote our country abroad the investments will flow in.
What kind of government does Bulgaria need to send a welcoming message for the investors?
I would recommend a government that would be open to the civilized world, no matter whether East or West. The government should be in close touch with the rest of the world and maintain good diplomatic and trade relationships.
Crisis kills export support for businesses
The global economic deterioration and tight markets have clogged the export assistance the Bulgarian trade agency Bultrade was to provide to local firms, economy minister Petar Dimitrov told Dnevnik. The agency had to kick-start in January together with the national Industrial Zones enterprise. Exactly a year ago the minister announced the government strategy to encourage exports by 2013 through the creation of 100 industrial areas across the country and trade missions abroad. The cabinet mapped out a plan to counter the downturn when the trade gap reached the formidable BGN 2.5 billion in 2008. A year later the measures failed to get off the ground as shrinking imports narrowed the deficit to BGN 1.6 billion in April 2009. Dimitrov blamed the lack of experts and staff turnover for the delayed launch of the agency and brushed aside speculations that trade representation offices and embassies will trim headcount, a measure Hungary introduced yesterday to weather the storm. The only stride the cabinet could brag about was the allocation of BGN 100 million of taxpayer money to the national company to facilitate the construction of industrial zones infrastructure. The minister said the money will go for the construction of the first seven zones in Rouse, Vidin, Svilengrad, Plovdiv, Varna, Karlovo and Pleven. However, opening seven zones a year is a snail’s pace to attain its goal to have 100 industrial zones in 2013, experts commented. With general elections due in early July, it would be the next cabinet to decide on state subsidies to large investors who plough over BGN 50 million into the local economy, taking their cue from the UK and Germany, which back 50% of top-priority investment projects, Dimitrov said.