BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 9 - 16 OCTOBER 2009 )
Sections/headline briefs:
MACROECONOMY:
· Bulgarian, Chinese firms strike deals for USD 850 M
· Bulgaria and Romania to build 2 hydropower plants with EU funds
· Electrowinds plans Bulgarian wind farm
· Bulgaria could join hands with neighbours on renewables
· Bulgaria, Italy prime minsiters discuss joint energy projects
· Fewer than 2 000 new cars sold in Bulgaria for 2nd consecutive month
· Retail chains expansion
· The banking sector has an anti-crisis buffer of 3 billion levs
· BDB gets EUR 8 M credit line for small, medium biz
· Inflation in Bulgaria freezes at 0% in September
· Bulgaria needs BGN 890 M for broadband internet
· Bulgaria’s trade deficit shrinks
INVESTMENTS:
· Big foreign investment in Bulgarian shares, funds top USD 225 M
COMPANIES:
· Mobiltel to sell iPhone in Bulgaria
· Bulgaria becomes Nokia's regional centre
· Stroiko exhibition opens with 500 participants
THE CRISIS:
· Bulgaria’s furniture sector braces for 40 % drop in sales
- Bulgaria industrial production curbs decline August 2009
- Large Bulgarian firms stress qualified labor as anti-crisis measure
· FM Djankov: Bulgaria out of Crisis after June 15, 2010
· Bankruptcies in Bulgaria up by 141% in September 2009
Articles:
MACROECONOMY:
Bulgarian, Chinese firms strike deals for USD 850 M
Six Bulgarian companies made deals with Chinese firms Thursday worth a total of USD 850 M.The contracts were signed during a ceremony at Bulgaria’s Council of Ministers in the presence of Bulgaria’s Prime Minister, Boyko Borisov, and the Vice President of China, Xi Jinping. Aurubus Bulgaria AD and China Minemetals Development Co. singed a deal for the purchase of electrolytic copper worth USD 800 M.Bulgaria Litex CO and Great Wall Motor Sharing signed a shareholders agreement for EUR 4 M for a joint venture for the production of Chinese cars in the Bulgarian city of Lovech.China Nonferrous Metal Mining Co and the Bulgarian firm Traxys AG signed a EUR 19 M letter of intention; so did Hengtian Group Co and Sviloza Yarn Co (USD 8,6 M), and Sinolight Corporation and Bulgaria’s Euromangan (USD 2 M).The Bulgarian Development Bank secured a EUR 35 M credit from the Chinese Development Bank. The first credit line for EUR 5 M was signed Thursday, and the second one for EUR 30 M is to be signed within a month. The BDB is going to use the funds for direct long-term crediting of small and medium-sized enterprises.
Bulgaria and Romania to build 2 hydropower plants with EU funds
Bulgaria and Romania are going to build two water-power plants, for which they are quickly tried to secure EU money.This was announced Sunday by Tudor Serban, Secretary of the Romanian Economy Ministry, as cited by newsin.ro.“Bulgaria wants to build two hydropower plants together with us with EU funds. Specialists from our two nations are going to meet in order to craft a memorandum, which they will present to the EU institutions,” Serban is quoted as saying.In his words, the memorandum for cooperation between Bulgaria and Romania may be signed within a month.After a brief visit to Bucharest, Bulgaria’s Economy Minister, Traicho Traikov, said on October 2, 2009, the two countries were considering such hydropower projects along the Danube.
Electrowinds plans Bulgarian wind farm
Belgian wind power developer Electrowinds has earmarked BGN 106 million for the construction of a 30 MW wind power project in Bulgaria. The project set to spring up on a site between the coastal city of Bourgas and Aytos, eastern Bulgaria, will be completed in 2011, said Lozan Stefanov, executive director of Electrowinds Bulgaria. The scheme earned the company a first-class investment certificate, which will enable it to benefit from fast-track administrative support. The Belgian firm is looking at ways to generate electricity from used vegetable oil and animal fats and has set its sights on solar energy, too. Its portfolio includes projects scattered in Italy, France, Romania, Poland and other European markets.
Bulgaria could join hands with neighbours on renewables
Bulgaria might join renewable energy projects in Southeastern Europe if it fails to fulfill its 16% clean energy target by 2020, said Kostadinka Todorova, head of the energy efficiency and renewable energy department at the energy ministry. Speaking at the first hydropower forum of Deloitte Bulgaria and Energy Monitor magazine near the Black Sea city of Varna, Todorova said that Bulgarian could join forces with Romania and Greece or Macedonia and Turkey if it wants to honour its commitment of ramping up the share of green energy to 11% of its total supplies by 2010 from the current 6-8%. The new capacities should be brought on stream after 2009 or be reconstructed after the same date, Todorova explained. In line with the European Union’s renewable energy directive, Bulgaria will introduce new legislation to be penned by March 2010 setting specific criteria for the power stations that can be plugged to the national grid. The new law is expected to get parliamentary green light by October 2010. Grid-connection bottleneck and hook-up delays caused by the national power system operator NEK and the electricity distributors are the main hurdles for Bulgaria’s clean energy developers. The new requirements will aim to sift out serious investors, while allowing for criteria to be set for operators willing to access the grid. Another aim is to help developers jump through regulatory hoops through a simplified licensing process, Dimitrova said.
Bulgaria, Italy prime minsiters discuss joint energy projects
The Italian Prime Minister, Silvio Berlusconi, and his Bulgarian counterpart, Boyko Borisov, held their first Sofia meeting Thursday evening discussing energy projects and politics.The meeting lasted only 30 minutes, but the talks are to continue later in the evening at the official dinner Borisov is giving in honor of his guest.The two discussed the additional EUR 300 M in compensations Bulgaria hopes to receive from the EU for the closure of Unit 3 and 4 of the Nuclear Power Plant (NPP) Kozloduy, and Berlusconi vowed his firm support in the matter.The Italian PM was adamant that the “South Stream” gas line is a project that must be completed, adding it is strategic for both countries and he had discussed it with Russian PM, Vladimir Putin, in Istanbul, during the negotiations between Turkey and Russia about “South Stream” and the “Burgas-Alexandroupolis” oil line.When asked if Italy can guarantee that “South Stream” will secure Bulgaria's independence of Russian gas supplies, Berlusconi pointed out that it was not Italy's fault gas can be found mostly in Siberia, and explained his country wants to add another gas line that would not go through the Ukraine so that the supplies are not fully dependent on the Ukraine's politics.Berlusconi also stressed on the importance of diversifying energy supplies and the importance of nuclear energy, but declined answering questions if Italy has had talks about participating in the project for a second NPP in Bulgaria – Belene.According to Borisov himself, Belene, and especially its financing, will be discussed during the dinner along with further talks about “South Stream.” Other topics at the dinner will include the combat of organized crime, but Berlusconi already mentioned his pride of Italy's progress and noted lately 225 criminal groups have been crushed and 29 of the 100 most wanted arrested.The Italian PM also spoke about Italy supporting Turkey's EU membership as a country that could become a bridge between Europe and the Arab world.Berlusconi recalled previous meetings with Borisov, offered high praise for his strength and his ambitious program to change Bulgaria.Other topics included intensifying trade between the two countries, despite the fact Italy is among the top 3 trade partners of Bulgaria, Berlusconi's previous support for Bulgaria's EU accession, reminders of his friendly relations with former Tsar and PM, Simeon Saxe-Coburg.The Italian PM joked saying he was nervous about Borisov beating him in the ratings and asked his Bulgarian counterpart to be careful not to pass the 60,5% approval mark – Berlusconi's own.When a reporter asked a question about the role of women in the life of a politician, Borisov was the first to answer: “Positive. What other can it be?”
Fewer than 2 000 new cars sold in Bulgaria for 2nd consecutive month
Only 1 887 new cars, buses, and trucks were sold in Bulgaria in September 2009, according to data of the Union of Car Importers.There is a slight increase in the sales from August when only 1 812 new vehicles were sold but the number is still below 2 000 for the second month in a row.A total of 21 075 new vehicles were sold in Bulgaria in the first nine months of 2009. This is a 52,6% decline, or some 23 400 vehicles fewer compared to the first three quarters of 2008.Ford sold 200 new cars in Bulgaria in September 2009 followed by Toyota with 183, and Opel with 153. Volkswagen, Skoda, and Peugeot also sold over 100 new cars each. Toyota remains the most popular brand in Bulgaria with 2 241 sales in the first nine months of 2009, or a 11,05% market share.
Retail chains expansion
Fast-moving consumer goods retail chains seem to have taken to heart the much-repeated adage about crises offering new opportunities. Despite gloomy forecasts about the state of Bulgaria’s economy and the purchasing power of Bulgarian consumers, the expansion drive of foreign retail chains in the country continues unabated.After years of making plans, Slovenian chain Mercator finally delivered on its promises on October 7, opening its first store – a 2000 sq m hypermarket in Stara Zagora, which took six months and three million euro to build. The company said it would target the medium price range and plans to operate at least seven stores by the end of 2010.The locations have been chosen, with Sofia, Plovdiv, Varna, Rousse and Bourgas next in line for Mercator stores. In Sofia, the retailer has already secured two plots, on the Vladimir Vazov Boulevard, next to the Baumax do-it-yourself store, and in Mega Mall in Lyulin borough.Bulgaria is the sixth country in South-Eastern Europe where Mercator has operations, marking the start of the second wave of regional expansion for the retailer, with stores in Macedonia, Albania and Kosovo to follow. Mercator expects its initial expansion drive in Bulgaria to cost 40 million euro.Mercator looks set to challenge Europe’s largest retailer, Carrefour, which opened its first Bulgarian store in Bourgas, but is yet to open a store in Sofia. Nationwide, its plans would also pit the Slovenian company against a familiar foe, against whom it has been competing in the region for years.Unlike Mercator, Serbia’s Delta Maxi has been operating in Bulgaria since 2007, when it bought the majority stake in local retail chain Piccadilly. Having reached 20 stores earlier this year, the chain plans to double the number over the medium term.In Bulgaria, the two regional chains have been competing for some time already, both intent to secure the prime locations. Mercator won out in several cases, including Vladimir Vazov Boulevard in Sofia and malls in Bourgas and Stara Zagora, by being willing to pay higher rents, Kapital weekly said, quoting sources familiar with the talks. Mercator’s first store may be a milestone for the company, but in the landscape of Bulgaria’s fast-moving goods retail, it was just a short spike against a background of frenzied activity.On the same day that Mercator unveiled its first location, German discount chain Penny Market said it would open 20 to 30 stores by the end of 2009, with a comparable number to follow in 2010.Although the discount chain targets the low end of the market, a different segment from Mercator, the German retailer plans to commit a lot more money to expansion in Bulgaria."Investments until December 2009 alone will reach 100 million euro, while the projected value of investment over the first five years is about 250 million euro," country manager Vassil Fechko said on October 7, during the inauguration ceremony of the Penny Market logistics centre near Sofia.The first stores to open doors for customers will be in Sofia, Botevgrad, Vratsa, and Nova Zagora.Penny Market is a division of retail giant Rewe, which also owns the Billa chain, also present in Bulgaria.Another German chain, Plus, plans an equally aggressive expansion in Bulgaria, scheduling the opening of its first five supermarkets for October 8. The locations for the new stores are Pernik, Gorna Oryahovitsa, Silistra, Sevlievo and Harmanli. By the end of the year, the chain plans to have 25 stores in Bulgaria, with a further 25 scheduled to open in 2010.Plus has already invested 150 million leva in Bulgaria, largely in the acquisition of 70 plots that will serve as future locations. "In the medium term, we expect [investment] to reach 500 million leva," chief financial officer Georgi Doundev said on October 5, as quoted by Dnevnik daily.
The banking sector has an anti-crisis buffer of 3 billion levs
The share of bad credits in Bulgaria may soar to 16.5% at the end of the year, which means that every sixth bank loan will become unserviced, the national bank has warned in a report on the banking sector end the end of the second trimester of 2009. This nightmarish forecast may come true if GDP falls by seven percent this year and by another 2.5% next year. The budget for next year provides 6.3% drop in the country's GDP by the end of the year and by another two percent next year. The share of unserviced loans increased by as much as 140 pct y/y in the period April-June 2009. Despite the deteriorating quality of the bank loans, the tendency started in the last trimester of 2008, the banking system in Bulgaria is relatively stable, the report of the national bank reads further. If worst comes to worst, the banking sector will need between 1.943 and 3.305 billion levs to buffer the shocks caused by the high rate of bad credits, but experts have calculated that the available buffers at the end of the second trimester amount to only three billion levs. The Bulgarian banks have reported profit of 498.3 for the first half of the year, down by 31.6% from a year ago.
BDB gets EUR 8 M credit line for small, medium biz
Bulgarian Development Bank (BDB) has negotiated an EUR 8 million credit line from Black Sea Trade and Development Bank. The line will be used to finance the setting up, modernisation and business expansion of small and medium-sized enterprises. BDB will also provide loans for turnover capital and export financing. The loans will be offered for a term of up to five years.
Inflation in Bulgaria freezes at 0% in September
Prices in Bulgaria have frozen and the inflation rate in September is precisely 0%, announced sources from the Bulgarian National Statistical Institute (NSI). only three months since the beginning of this year register slight increase of prices. In the other past months of 2009, the inflation rates kept on dropping while in September they came to a complete standstill of 0%. The inflation rates in the first nine months of 2009 stood at minus 0.1%. In the one-year period between September 2008 and September 2009 the prices went up by only 0.2%. As a result of these processes, saving money turns to be really profitable: while in 2008 the interests on deposits failed to even cover the inflation rates, in 2009 prices were practically frozen and the banks fixed high interest rates of about 8% on an annual basis for deposits in levs.
Bulgaria needs BGN 890 M for broadband internet
Bulgaria will needs to invest BGN 890 M in the development of a broadband Internet network all over the country.This has been announced Tuesday by Deputy Minister of Transport, Information Technology and Communications, Parvan Rusinov.In his words, currently, the ministry is developing a strategy on providing Internet access on the territory of the whole country. The government aims 100% coverage until 2013.However, the state budget will not cover the whole broadband Internet investment, Rusinov said. The business will be asked to take some of the investment burden, in exchange of which the government will offer some better conditions.“The broadband Internet network is a priority for the government. The development of such infrastructure in the poorly developed regions is part of most governments' anti-crisis measures”, Rusinov said.
Bulgaria’s trade deficit shrinks
Bulgaria’s trade gap continued to decrease in August 2009, when it fell to 500.4 million leva by FOB (free-on-board) prices, its lowest monthly value since January and since the crisis erupted, the statistical office said.On an annual basis, the shortfall narrowed by 54.4 per cent.In the eight months of the year, the deficit totalled 6.053 billion leva, or a 44.3 per cent decline in the corresponding period of 2008.The contraction was helped chiefly by curbed export slowdown for several months in a row against the backdrop of a relatively steady increase in imports."August saw the smallest drop in imports since the start of the year. The 25 per cent decline represents its best value so far in the year and is a massive rebound on April’s 45 per cent fall. Imports continue to tumble relatively fast, bringing the deficit to its lowest point since January," Georgi Angelov, senior economist with the Open Society Institute, told Dnevnik. Exports have been perking up for three or four straight months and foreign demand seems to be bouncing back, while Bulgarian companies managed to cut down prices, he added.According to the National Statistical Institute (NSI), exports in the eight months through August added up to 14.517 billion leva compared with 20.711 billion leva a year before.Imports over the review period came in at 20.571 billion leva, which is about 35 per cent less than January-August 2008.Bulgaria’s trade balance with the European Union (EU) was negative at 2.969 billion leva.Turkey solidified its leadership position as Bulgaria’s largest non-EU export market, even though exports were down by 48.3 per cent year-on-year to 991.7 million leva. Next came Serbia and Russia.
INVESTMENTS:
Big foreign investment in Bulgarian shares, funds top USD 225 M
The ten largest foreign investors on the Bulgarian Stock Exchange (BSE) have injected USD 225 million in domestic stocks and mutual funds, global media and consultancy outfit Thompson Reuters told an investors relations event by the Bulgarian Investor Relations Society (BIRS) in Sofia yesterday. The biggest international investors operating on the BSE are based in the US, Greece and Germany. The bulk of their capital is concentrated in stakes in leading collective investment schemes and the most liquids stocks on the market. New York-based asset manager Artio Global Management tops the list of foreign investors in Bulgarian shares and mutual funds, having pumped in excess of USD 80 million. Portfolio investors’ top 10 features also Gramercy Advisors, Danske Capital Finland, Pioneer Investment Management and EFG Eurobank Asset Management, to name but a few. In terms of share of total stock and stake assets, Gramercy Advisors is the largest investor, with Bulgarian securities representing more than 27% of its portfolio.
COMPANIES:
Mobiltel to sell iPhone in Bulgaria
Bulgaria's biggest wireless operator Mobiltel plans to start offering Apple iPhones in its network, CEO Andreas Maierhofer said during a presentation of NTS's smartphones. The smartphones are the first handheld device in Bulgaria using Microsoft Windows Mobile 6.5. Currently iPhones are offered in the shops of Cosmote's Bulgarian arm at prices starting from BGN 749 with VAT.
Bulgaria becomes Nokia's regional centre
Bulgaria becomes one of Nokia's regional hubs, Greg Williams, managing director for Southeast Europe, said. Nokia Messaging, the service that combines all communications in one, starts officially today. The Bulgarian team of the world's mobile phone production leader will be increased from two to eight employees, Bulgarian regional manager for Nokia, Rossen Petkov, told pari.bg.
Stroiko exhibition opens with 500 participants
This year's Stroiko 2000 exhibition for architecture, construction and furniture opens on Wednesday. Some 500 companies will participate, mostly from Bulgaria, compared to 700 three years ago. The foreign participants are mainly from the Balkans, and several from Germany, France and Russia. Portable houses and automatic parking systems are some of the interesting exhibits.
THE CRISIS:
Bulgaria’s furniture sector braces for 40 % drop in sales
Battered by a sharp deterioration in domestic demand, Bulgaria’s furniture manufacturers are facing an up to 40 per cent slide in sales, according to Kalin Simeonov, chairman of the wood processing and furniture chamber.Speaking at the World of Furniture exhibition at Sofia’s Inter Expo Center, he said that furniture demand had decreased by 50 per cent since the end of 2008, when the market was still alive and kicking.Unlike wood processors, which were hit by the crisis as early as mid-2008, furniture makers pulled off a five per cent increase in sales for the year, hoping to dodge a decline in 2009.A survey by local pollster Barometer showed that the furniture industry could have scaled up its output by 15 per cent if the crisis had not erupted, building on robust demand propped by blossoming construction and mortgage home purchases.Thus, while about 70 per cent of company executives had lined up fresh investment in end-2008, now many have put their plans on the rocks, Simeonov said.But as furniture makers see no signs of an upcoming rebound, the wood processing industry is experiencing tepid growth. Struck by the downturn in mid-2008 when the market ground to a complete standstill, the sector posted a slight recovery in the recent months. Companies based in the southern Rhodope region say foreign demand is perking up, with orders tricking in from Greece, Israel and Iraq, among other markets.
Bulgaria industrial production curbs decline August 2009
Bulgaria’s industrial output shrank by a slower pace in August than in the previous months, falling by 15.9% year-on-year versus between 18% and 22% in the three months before, showed preliminary data by the statistical office.The figures confirm the results in the latest business climate polls that economic activity has decelerated to the lowest expected point, ruling out any steeper declines in order intakes and production in the months ahead. Industrial output contracted by 7.8% in the seasonally weak August compared with July, following rises of 1.9% and 7.5% in the two months before. The mining and quarry industry saw output dwindle by 17.7% year-on-year as the processing industry dropped by 18.8%. Investment products suffered a 22.7% decrease and production of intermediate goods was down by 26.3%. on a monthly basis, the mining and quarrying industry slowed by 5.0% and the processing by 9.1%. Tobacco products output rose by 20.8% and pharmaceuticals production by 10.1%. Despite the upbeat business climate outlook, company executives approached for comment by Dnevnik in September projected that the fourth quarter will be tougher than the third. Their forecast echoes the expectations of the International Monetary Fund (IMF), which warned Bulgaria will feel the peak of the crisis at the end of the year.
Large Bulgarian firms stress qualified labor as anti-crisis measure
Preserving their qualified personnel is the major anti-crisis measure to be emphasized by most of the large companies in Bulgaria.This is the main conclusion from a survey of 76 Bulgarian companies defined as “large-scale taxpayers and insurers” by the National Revenue Agency, conducted by Apeiron Research.According to the survey, the major measures the large-scale companies have introduced to cope with the effects of the crisis are: reducing expenses through layoffs or slashing bonuses – over three-fourths of the respondents; developing new products and services (over 50%); and preserving the qualified staff (50%).In the coming months, however, 71% of the large Bulgarian companies are going to emphasize keeping their expert employees, 66% - developing new products and services, and 63% - improving the motivation of their staff; reducing the expenditures comes fourth.About one-third of the large firms have said their business had been affected seriously by the economic crisis, whereas two-thirds say they have been affected only moderately.75% have said the major factor hurting their business is the decline in demand especially as far as export-oriented producers are concerned. only 14% say they have suffered because they have denied credits by financial institutions.Another main conclusion of the Apeiron survey, however, is that the economic crisis has had a positive effect on the business environment in Bulgaria by increasing the intra-company communication and discussion especially over matters referring to economic recovery, which is believed to boost the organizational management.Apeiron Research is a project of Apeiron Communications, a Sofia-based consultancy specializing in intra-business communication. The detailed results of their latest survey are to be presented October 15, 2009.
FM Djankov: Bulgaria out of Crisis after June 15, 2010
Bulgaria's Government plans to revise and raise the 2010 budget on June 15 if the anti crisis measures take effect in the spring as expected.The announcement has been made Monday by Bulgaria Finance Minister, Simeon Djankov, in an interview for NOVA TV.“I plan that we make a budget actualization on June 15 and then continue moving upwards. By that time there must be enough signals for exiting the crisis – I expect to see them in the beginning of spring. They will allow us to increase the expenditures. Until then we will be working with balanced budget”, Djankov explained.In his words, the money given to different ministries are not so little as they seem to be. The 2010 budget will be the same as the one two years ago, and will logically differ from the 2009 one because it was artificially written up.Minister Djankov also commented on the decision of the government to increase the cigarettes excise and keep the alcohol tax untouched.“The final decision was taken by the Prime Minister, Boyko Borisov, but it was based on analysis. The Government is a collective body and we take in consideration different opinions. According to me and my ministry, the excise for both goods should be increased, but we eventually agreed with the common point of view, and it is normal”, the Minister said.He expressed his indignation of the bad condition of the state after the last government's rule. only for two week after the general elections results were announced and the Three-way coalition knew about its defeat, 2,5 M was spend. Djankov did not mention the currency of the sum.“You probably remember when Nikolay Vasilev (former Minister of State Administration) said in front of the Parliament: “We have only bread and water”. Well, currently we do not have bread, so we only have water”, the Finance Minister said.
Bankruptcies in Bulgaria up by 141% in September 2009
The number of bankruptcies in Bulgaria has increased by 141% compared to September 2008 over the negative effects of the global economic crisis.According to statistical data of the credit solution provider, Coface Bulgaria, a total of 239 bankruptcy filing procedures have been initiated in Bulgaria since the beginning of 2009, compared to 99 procedures for the same period in 2008.The most bankruptcies have been registered in agriculture and city economy. 11,3% of all bankruptcies in Bulgaria have been filed by representative of these businesses, and the increase is 170% compared to 2009.A total of 22 construction companies have filed bankruptcies since the beginning of 2009, and the rise is 144% on year basis.The crisis have forced many companies from the administrative and consulting services sector, which has been thought to be a stable one, to file bankruptcies. 6% percents of the total insolvency procedures are from this sector.