BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 16 - 23 OCTOBER 2009 )
Sections/headline briefs:
MACROECONOMY:
· Government to cut VAT to 16%
· Bulgaria’s grid fit for just 17% of clean energy pipeline
- Azerbaijan ready to export gas to Bulgaria
· Ukraine bans import of Bulgaria lamb
· Bulgaria's meat export doubles over economic crisis
· Bulgaria imports from Turkey, China down 50%
· Jordan interested in increasing imports of Bulgarian foods and textiles
· Bulgaria's wine production, export see drastic slump
· Bulgaria, Eastern Europe M&A market remains on standby
· Bulgaria’s EU funds to be unblocked by end-year
· Bulgaria should fire 150 MW solar parks a year by 2020 to hit goal
· Bulgaria trails EU in e-trade access
· EIB boosts infrastructure, small companies in Bulgaria
INVESTMENTS:
· Germany’s leading photovoltaic system integrator signed a project
· Gorubso plans to install solar panels
· New web site promotes Bulgaria as investment destination
COMPANIES:
· Far east money will provide for Bulgarian companies
· Maritime Shipping to seek over BGN 16 M in capital raise
· Canadian company Euromax drills for gold in Bulgaria
· Deloitte ranks 5 Bulgarian IT firms among central Europe top 50
THE CRISIS:
· Crisis emaciates business optimism
· One-third of Bulgarian building firms shut as crisis rages
· Crisis hit dairy farmers to get EUR 280 M EU aid in 2010
· Crisis on stock exchanges is over
· Bulgaria loses BGN 83 billion due to crisis
· Crisis slashes 20% of municipal project costs
Articles:
MACROECONOMY:
Government to cut VAT to 16%
Value-added tax in Bulgaria should be slashed from 20% to 16% by the end of the term of the new government, said finance minister Simeon Djankov. The measure proposed by the Cabinet dominated by right-of-centre political party GERB, which swept into power after the July 5 parliamentary elections, has been long pursued by the Union of Democratic Forces (UDF) and Democrats for Strong Bulgaria (DSB). Speaking at an even of the Bulgarian Medical Association (BMA), Djankov said the government will not introduce differentiated VAT rates for medical equipment and medication as such a move would trigger an avalanche of requests for lower VAT for children literature, children’s clothing and other goods and services.
Bulgaria’s grid fit for just 17% of clean energy pipeline
Bulgaria’s power system has the capacity to hook up only 17 percent of the renewable energy projects announced so far, experts told a hydro energy forum held near the coastal city of Varna last week. Ventsislav Zahov, electricity regimes head at the state-owned system operator ESO, estimated that the network could accommodate up to 1,800 MW of capacities but as many as 11,000 MW in wind and solar parks have been planned so far. Even if only half of this moves from the drawing board into practice, vast backup capacity is needed to secure supplies when winds are low, he explained. Hydro power plants could play the role of filling in for other renewable energy projects but threadbare energy infrastructure is a major obstacle for grid-connection. Before they could go ahead with any grid investments, the national power gird operator NEK and the regional electricity distributors need the nod of the State Energy and Water Regulatory Commission (SEWRC). The watchdog often turns down proposed investments, citing small technical capacity. Alternatively, investors have to foot the bill for the missing infrastructure. Plamen Dilkov, managerial agent of Petrovilla Bulgaria, the local unit of the Italian energy group, said the company had to pump BGN 2.5 million to lay 12.5-kilometre power lines linking its Lakatnik hydropower project to the grid. Czech power utility CEZ, which operates the network, agreed to buy out the power lines but at a lower price. Hydro energy investors called for shortened water use application procedures as well as faster building permits and land status change processes. Permission, environmental impact assessment and acquisition of land ownership now drag on for three or four years, said lawyer Ekaterina Gramatikova.
Azerbaijan ready to export gas to Bulgaria
Azerbaijan President Ilham Aliyev has stated that his country is ready to export natural gas to Bulgaria and other EU countries.Aliyev, speaking at a domestic socio-economic cabinet meeting, said that “Azerbaijan is ready to export its gas to the European Union,” and that Greece, Bulgaria, Italy, Romania, Hungary, Austria, Germany, Switzerland are among the potential partners, apa.az reported.He blamed Turkey transit problems for not being ready to supply the EU with gas until now. Aliyev added; “It is no secret that for many years Azerbaijan has been selling gas to Turkey for one third, 30% of the market price. Which country sells its natural resources, especially under the present circumstances, for 30% of the market price and is satisfied with it?”Aliyev concluded that EU countries including Bulgaria are ready to buy Azerbaijan's gas at the market price.
Ukraine bans import of Bulgaria lamb
The Ukraine has banned import of Bulgarian lamb because of cases of brucellosis established in the northern Bulgarian city of Lovech.The ban has been imposed by the Ukrainian State Committee on Veterinary Medicine.However, Bulgaria's National Veterinary Service has announced that it has not detected any cases of brucellosis in Lovech region, but the decease scrapie.Scrapie is a fatal, degenerative disease that affects the nervous systems of sheep and goats. The decease is infectious and transmissible among similar animals. Scrapie has been known since the 18th century and does not appear to be transmissible to humans.The Veterinary Service reminded that one scrapie case was detected earlier in October. The European Commission and the World Organization for Animal Health (OIE) have been informed about this, and information about it was issued on OIE's website October 2.
Bulgaria's meat export doubles over economic crisis
Bulgaria’s export of meat has increased by 45,8% in the first six months of 2009.According to data of SFB Capital Market, a Bulgarian consultancy, the country’s meat export doubled in the second quarter of 2009 compared to the same period of 2008.At the same time, Bulgaria’s meat import dropped by 2,7% in the first six months of the 2009 compared to January-June 2008. The decrease for the second quarter is 2,3% compared to the second quarter of 2008.The total turnover of the Bulgarian meat producers increased by 10% in the second quarter of 2009. Bulgaria’s internal market has also seen higher sales of poultry and beef.
Bulgaria imports from Turkey, China down 50%
Imports from Turkey and China have fallen by over a half in the first nine months of 2009 year on year due to the financial crisis, the Bulgarian customs agency reported Friday.From Turkey BGN 1,2 B of stock was imported in the nine month period which represents nearly 13 % of total imports from third countries. Chinese goods imported into Bulgaria totaled BGN 791 M or nearly 8% of total imports.The customs agency reported that there has been a strengthening of control on Turkish and Chinese cargo as well as on Romanian and Greek imports.They added however that the overall decline is due to the impact of the financial crisis.
Jordan interested in increasing imports of Bulgarian foods and textiles
Jordan's state-run Civil Service Consumer Corporation is aiming to complete contracts with Bulgarian companies to import food and textiles, the Bulgarian Chamber of Commerce and Industry (BCCI) said in a statement, quoted by Investor.bgл The food manufacturing and processing industry in Bulgaria has been of serious interest to Jordan, in particular fresh and frozen meat, oils, milk, honey and canned food but the Jordanians have also expressed interest in textiles, clothing and shoes.The Jordanian corporation and the BCCI are set to meet on October 22 2009, along with major representatives from the Bulgarian business sector, Investor.bg reported.The Civil Service Consumer Corporation is entrusted with the supply of "diversified foods and goods"; the company has been involved in previous deals between Bulgaria and Jordan. Details regarding the financial scale of the joint venture will become apparent after the conference.
Bulgaria's wine production, export see drastic slump
Bulgaria's wine export declined by 45,2% in the second quarter of 2009 compared to the same period of 2008.The decline in the first quarter of 2009 was 32,6%, according to data provided by “Capital Market” Bourse Information Company, a Sofia-based consultancy.In the second quarter of 2009, Bulgaria’s white wine production dropped by 31,1%, and the production of red wines – by 40,5%. In the first quarter, the slumps were 20% and 30% respectively.Bulgaria’s total wine trade turnover decreased by 36% in April-June 2009, compared to the same period of 2008, and by 34% in the first half of 2009. Bulgaria’s positive wine trade balance dropped by 42,8% in the second quarter of 2009 compared to the second quarter of 2008.
Bulgaria, Eastern Europe M&A market remains on standby
The mergers and acquisitions market in Bulgarian and the central European region have hit the rock bottom in terms of both deal numbers and volume but recovery could be on the way mid-next year, experts told the second M&A conference of Capital weekly. Earlier this year, the prospects were brighter, with experts anticipating the market to revitalise by the end of this year. Consultants blamed it on the yawning gap between sellers’ and buyers’ expectations. Luc Hanon, managing director of one investment banking titan Rothschild, said some entrepreneurs still lived in 2007, when Eastern Europe alone saw 80 deals with a total price tag of almost EUR 4 billion. Experts predict the stagnation will not hold for long and more deals will be struck in the second half of next year. “Obviously the market has collapsed but it seems we have hit some bottom,” said Rosen Ivanov, managing partner at financial advisors Entrea Capital. one sign that the investment drought is easing up is the fact that strategic investors no longer expect Eastern Europe is headed for another crash and have set their sights back on the region, he said. Furthermore, equity investment funds are eyeing Bulgaria, planning to sink around EUR 400-500 million in local businesses, he added. Another factor for a rebound on the M&A market is the government’s commitment to create a favourable, investor-friendly environment. No acquisitions of Bulgarian companies made it to the CCE top 20 this year but the market has developed steadily in the past two years. The market ranks in the middle of the table -- trailing Poland, the Czech Republic, Hungary and Ukraine -- but before Croatia and Romania. The Bulgarian M&A market has topped around EUR 250 million since January versus EUR 1.7-1.8 billion for the entire 2008. Deal numbers have also diminished significantly, according to media and consultancy outfit Thompson Reuters.
Bulgaria’s EU funds to be unblocked by end-year
“The flow of funds under EU’s operational programs to Bulgaria may resume by Christmas. By the end of the year we must be ready with a positive assessment of compliance of the management systems for these programs,” Bulgaria’s deputy regional development minister Lilyana Pavlova said. Interim payments under these operational programs will be the basic amounts Bulgaria will be eligible to absorb as soon as Brussels approves its evaluation of compliance. Cabinet also plans to continue its diplomatic effort towards unfreezing the PHARE funds, which were blocked over large-scale misappropriations under the previous government. “The negotiations regarding the extension of the deadlines for some of our ISPA projects shall continue as well,” Pavlova added. Meanwhile, a total of 18 contracts worth 133 million levs (1 euro = 1.95 levs) were signed yesterday under EU’s program for regional development. At the same time 30 million levs were cut off from contracts for urban environment improvement, following a review by experts. The overall value of the scheme under operational program for regional development is over 244 million levs.
Bulgaria should fire 150 MW solar parks a year by 2020 to hit goal
Bulgaria should bring on stream at least 150 MW of solar power capacity and as much wind each year through 2020 if it is to meet its 16% renewable energy target by 2020, an industry expert said. Speaking at a press conference of the newly-founded Bulgarian Photovoltaic Association (BPA) on Wednesday, Roumen Hristov, manager of photovoltaics (PV) provider Sun Service, said that the country has lagged with new clean energy capacity in the three years since the adoption of the Renewable Energy Act. Operational capacity is estimated at a paltry 3 MW. The new association, which brings together 17 companies, will team up with government bodies, power distributors and grid operator NEK to hammer out legislative amendments aimed at helping Bulgaria’s fledgling green energy sector take off the ground. According to the BPA, the energy watchdog, the State Energy and water Regulatory Commission (SEWRC), should set the price for hooking solar plants to the grid operated by NEK and distributors. Under the current rules, the prices can by updated by the regulator on an annual basis. Investors have also called for a more stringent grid-connection process to prevent power distributors from using loopholes in the current legislation. Solar parks qualify for priority grid-connection but distributors’ investment plans and technical glitches are often in the way of investors, who are forces to foot the bill for new power lines. BPA board chairman Ilko Yotsev said the government should produce a grid development strategy and put together a registry of the existing vacant capacity.
Bulgaria trails EU in e-trade access
Three out of four online purchases abroad in Bulgaria fall through, the European Commission (EC) said in a new report on e-commerce. Testing conducted by the Commission revealed that in 75 percent of the cases Bulgarians fail to purchase goods from foreign websites. This is most often due to registration problems, failed payment due to the narrow range of online payment options or retailers’ policies, which do not include shipments to the country.
EIB boosts infrastructure, small companies in Bulgaria
During an official ΕIB visit to Sofia, a loan of 43.5 million euro for urban road transport in the Bulgarian capital was signed in the presence of Bulgarian Prime Minister Boyko Borissov by Marta Gajęcka, EIB Vice-President responsible for lending in Central Europe as well as Bulgaria, and the acting Mayor of Sofia, Minko Guerdjikov. Prime Minister Boyko Borissov, as former Mayor of Sofia, had initiated this project. Gajęcka also signed with the Bulgarian Deputy Prime Minister and Minister of Finance Simeon Djankov a Memorandum of Understanding that will facilitate implementation of large infrastructure projects in Bulgaria. The Memorandum provides for technical assistance from the European Investment Bank in order to enhance the monitoring and implementation of certain major transport and environmental projects in the country co-financed with European Union grant funds and EIB loans. on this occasion the European Investment Bank also signed a 50 million euro facility with Eurobank EFG Bulgaria, for funding small and medium-sized companies in the country. "I am particularly happy to see a boost being given in Bulgaria to our activity focusing on the well-being of the citizens. This is achieved through infrastructure that improves the quality of life and through the small and medium-sized companies that employ most of the people in the country. Our support takes the form not only of lending, but also of providing expertise and assistance to streamline the implementation of complicated key projects, supported equally by the Government, the EIB and the Commission", Gajęcka commented. "I am pleased to see urban transport for the Bulgarian capital high on the agenda. After our 105 million euro support for the Sofia metro last year, our efforts are now focused on urban road transport. The EIB facility in partnership with Eurobank EFG Bulgaria will offer greater scope for meeting the liquidity needs of local companies in this unprecedented international economic crisis that we are facing", Gajęcka added.The remit of the EIB, the European Union's bank promoting European objectives, is to contribute to the integration, balanced development and economic and social cohesion of the Member States.In the last five years since 2004 the EIB has provided loans in Bulgaria totaling some 1.8 billion euro including the current loans. EIB operations now cover all of the country's key economic sectors, ranging from basic infrastructure to manufacturing and services and including support for small and medium-sized companies as well as municipalities. A total of 700 million euro of this amount was for co-financing Bulgaria's national contribution to the implementation of investment priorities and measures with EU Cohesion and Structural Funds during the period 2007-2013.
INVESTMENTS:
Germany’s leading photovoltaic system integrator signed a project
Germany’s leading photovoltaic system integrator Phoenix Solar AG has signed a project
development contract with the local arm of Germany’s energy, consultancy and healthcare company Krass Capital Group AG for the installation of solar panels with total
production capacity of up to 20 MW, according to a note on its website. Phoenix Solar will construct the solar park, operate and maintain it. It considers a sales option afterwards. The facility should be completed next year. Phoenix Solar is specialised in the planning and construction of large solar power plants and is a specialist wholesaler of complete solar power systems and components.
Gorubso plans to install solar panels
Local mining company Gorubso plans to install solar panels with total capacity of 4 MW.
The photovoltaic park will be located on former extraction sites of the company and will meet peak electricity demand of households in the southern city of Kardzhali. The investment amount and the completion deadline have not been unveiled by now.
New web site promotes Bulgaria as investment destination
The American University in Bulgaria (AUBG) in partnership with Eastisoft software company and the American Chamber of Commerce in Bulgaria released a new web-site (InvestNet.bg), providing up-to-date, relevant and practical information and advice to potential and current investors in Bulgaria, the AUBG said. InvestNet.bg will serve as an investment and business network financed by the Bulgaria Fund, a grantmaking initiative of the United States Agency for International Development (USAID) and the German Marshall Fund.Amid the global economic and financial crisis, the volume of investments is shrinking compared to previous years, and the competition for attracting foreign investments becomes more intense. The new web site aims at improving Bulgaria's image as an attractive investment destination, the AUBG said. It provides detailed information about business opportunities in Bulgaria, investment projects, along with information about EU funding and public procurement bids.InvestNet.bg combines the efforts of over 30 companies, including relevant government agencies, commercial counsellors, chambers of commerce, industrial associations, consulting companies, analysts, and NGOs from all relevant spheres.
COMPANIES:
Far east money will provide for Bulgarian companies
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
Each and every euro cent is valuable in crisis times regardless of where it has come from - whether from Brussels, New York, Arabian Peninsula or the Far East. Money is money, but it is most valuable when it lacks. Currently, the Bulgarian companies need to be financed at affordable prices. That's why a total EUR103 million worth of credit lines from foreign banks that the Bulgarian Development Bank (BDB) has negotiated are a real treasure. Moreover, their interest rates are affordable, the period within they can be used exceeds five years, and they are targeted at the small and medium enterprises (SMEs) - the ones that need financial support the most. Some may consider EUR103 million a drop in the ocean that is not enough to revive the local business. But after the foreign credit lines ceased after October 2008 each and every euro cent has become extremely valuable. According to the statistics, at the beginning of 2009, the total amount of long-term credits extended to Bulgarian banks from abroad was EUR1.84 billion, going down by more than half a billion euro to EUR1.33 billion just eight months later. That's why, the new credit lines of EUR103 million that BDB has negotiated is a remarkable success. Moreover, part of them has been provided from institutions that have never worked with Bulgaria so far. one of the examples is the loan agreement with China Development Bank (CDB) that the BDB executive directors Dimitar Dimitrov and Sasho Chakalski signed on October 15, 2009. The terms of the treaty order BDB to receive EUR5 million for five years. If the money is successfully absorbed, the Chinese partners will extend to the Bulgarians a further EUR30 million. And the important detail here is that the Bulgarian bank will be allowed to use the money to refinance credits and this is an opportunity, which is rarely provided in such cases. In most of the cases, the money is being given after a package of new projects has been presented and those projects have been given the green light to get financing. But the CDB financing provides more flexibility to BDB when SMEs are being financed. It is also important that the above agreement paves the way for the establishment of relationships with one of the biggest banks in China - the country that currently has the world's largest currency reserve and, in contrast to many other developed economies, boast a surplus of money, looking for lucrative opportunities to invest it. A week before the above agreement to be signed, Sasho Chakalski signed in Thessaloniki a credit line agreement with Black Sea Trade & Development Bank whose shareholders are all countries of the Black Sea region, Bulgaria included. The loan that our country will get is a five-year one and it totals EUR8 million. The money is intended for financing corporate deals pertaining to Bulgarian goods for export. Many local companies need such a service since the financial crisis made many of their foreign partners to delay payments and thus deprived them of working funds. The terms on these credit lines will depend on the export agreements that the Bulgarian companies hold, as well as on the ways of payment that they and their foreign partners have negotiated. Until the end of November 2009 BDB will also be provided with EUR40 million for investment loans. Our country will get a 10-year credit line for EUR15 million from the Council of Europe Development Bank (CEB) and a further EUR25 million over 10 years from the European Investment Bank (EIB). According to Sasho Chakalski, these are the first loans that the two European credit institutions extended to a Bulgarian bank asking not for state guarantees. It is true that BDB is owned by the Finance Ministry, but most of the development banks in the European countries are state ones, too. Despite of this, however, both CEB and EIB require state guarantees to back loans extended to banks from developing countries. The fact that the two banks have made an exception to the rule speaks volume about the trust of the European institutions in the BDB's stability. The Far East is the source for another EUR20 million that the Japan Bank for International Cooperation (JBIC) is extending to BDB. The money will be poured for over eight and a half years into Bulgarian companies that purchase high-tech equipment from Japan. The terms of the loans will again depend on the concrete deal. By the way, BDB is not going to create new products for extending loans with all the above-mentioned credit lines. It will use the already present services instead. For example, loans with the Japanese money could be extended under the already present programme of the bank, Japanese Business Initiative. It envisages Bulgarian companies, which import high-tech equipment from Japan for more than EUR200,000 to be allowed to purchase it through credits from BDB. The latter is negotiating also with Development Bank of Austria on a EUR20-million credit line for financing Bulgarian companies' investments in other countries outside the European Union. The question is about the purchase of machinery, technologies and raw materials for plants that have been acquired by Bulgarian entrepreneurs in countries such as Macedonia, Serbia, Albania or Ukraine. No doubt, such opportunities could hardly draw the attention of the local businessmen right now, but we all hope that the crisis will blow over some time or other. Moreover, there are Bulgarian companies that have invested in other countries and such cheap financing could help them further develop their business. If the businessmen have profitable investment projects that are well grounded, they leastwise have the opportunity to apply for financing.
Maritime Shipping to seek over BGN 16 M in capital raise
Bulgarian river shipping company BRP, part of industrial conglomerate Chimimport, has embarked on raising BGN 16.2 million in a capital hike, which got regulatory nod yesterday. BRP will offer to investors 6.75 million shares with an issue price of BGN 2.40 and a par value of BGN 1 apiece, aiming to augment its capital to BGN 35.7 million. The company did not disclose what the proceeds will be used for. Earlier this year, Chimimport, which in 2006 paid BGN 22 million to acquire the river shipping business, bagged almost BGN 200 million in a preferred stock issue, saying the proceeds will be pumped into subsidiaries, including a capital rise at BRP. BRP racked up a BGN 3.93 million consolidated profit in the first half of the year, down from BGN 4.5 million in the year ago period. Sales surged by 20% to BGN 33.4 million and expenses widened by over BGN 6 million. Debt to banks and other financial institutions totaled BGN 588,000, down by nearly BGN 400,000 compared with the six months of 2008.
Canadian company Euromax drills for gold in Bulgaria
Canadian company Euromax Resources Ltd. has started drilling for gold near the Bulgarian towns of Breznik and Trun, an official company press release reported Wednesday.Euromax reported that it is now evaluating the potential of both deposits “for exploitation of the higher grade material with a low impact underground mining operation.” The company suggested that there were over 1 million tons of gold in the Bresnik reserve.In March 2009 Australian mining company International Resource Holdings (IRH) agreed to sell its stakes in its two Bulgarian projects to Martern, a unit of Canadian mineral exploration firm Euromax Resources.Euromax thus became the new owner of IRH's units in Bulgaria after agreeing to buy them at a price of USD 112 000, which equals half the value of the funds invested by Martern in the projects under a convertible note agreement signed by the two companies in December 2008.Under the terms of the deal, International Resource Holdings sold Thrace Resources, its wholly-owned unit in Bulgaria, following an evaluation of its financial position and the economic environment.Euromax bought the gold and silver drilling licences for the Rakitovo and Breznik deposits, in southern and western Bulgaria, respectively.
Deloitte ranks 5 Bulgarian IT firms among central Europe top 50
Five Bulgarian IT companies have been included in the annual ranking of the international consultancy Deloitte of the 50 most dynamic IT firms in Central Europe.Four Bulgarian companies are in the Technology Fast 50, and one more is in the “Rising Stars” category.This is the largest number of Bulgarian firms in the Technology Fast 50 ranking of Deloitte since Bulgaria was included in the ranking in 2007. Deloitte ranks the most dynamic IT firms in Central Europe based on their revenue growth over a period of five years.The best ranking Bulgarian IT firm in the 2009 ranking is the software company Telerik, which has achieved a growth of 2 327% over the last five years, and is placed 5th.The Bulgarian online media group Investor.BG AD is sixth with a growth of 2 130%. Universal K is the third Bulgarian participant, which is ranked 20th with a growth of 664%. The software and consultancy firm Interconsult Bulgaria is 34th with a growth of 447%.The Bulgarian multimedia solutions provider HAND Ltd is ranked among the ten “rising stars” firms with a growth of 315%.The criteria for participating in the Technology Fast 50 Ranking of Deloitte is to be a IT firm headquartered in Central Europe, with annual income of at least EUR 50 000 over the last five years.The rising stars category is for younger firms, whose annual income is supposed to exceed EUR 30 000 over the last three years.The leader in the 2009 Deloitte Technology Fast 50 Ranking is the Polish portal Netmedia which has a growth of 7 120%.
THE CRISIS:
Crisis emaciates business optimism
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
If just less than a year ago you have asked any company owner (regardless of the size of his business) of a prognosis about its future development, you would have no doubt heard rosy prognoses about fast profits and business development. The financial and economic crisis, however, radically changed the market environment and cooled off the enthusiasm of the majority of the Bulgarian entrepreneurs. This is the result of a survey carried out by the National Center for Study of Public Opinion on the business climate assessment in the country and the status of the business under the conditions of economic stagnation. The survey was carried out among 430 companies that have taken part in the International Technical Fair in Plovdiv from September 28 to October 2, 2009. According to 38% of them, the companies' toughest problem now is the lack of enough markets where they can place their products, be they goods or services. Second comes (as being pointed by 30% of the companies) the problem with the disloyal competition and third (with 15% of the companies) comes the lack of capital. The decreased demand of goods and services impedes the covering of the credits and 11% of the companies consider the credits "unthinkable". It is interesting that problems that has until recently been actual (for example, the lack of qualified personnel and the poor regulations) are now being put aside. Let us remind that over the last year the Bulgarian Industrial Association kept on promoting its idea about importing personnel because Bulgaria lacks labour force. However, this issue will hardly be tabled again at least over the several years to come. The research is also clearly revealing a weakening of the positive attitudes towards the opportunities for doing business in Bulgaria. As compared to 2008 when 37% of the companies answered that the business environment was getting better, the optimists have now dropped to just 6 percent. At the same time, the answers saying that the business environment in the country is worsening jumped almost three times (from 24% in 2008 to 68% in 2009). The majority of the pessimists are those employed in the agriculture sector, the representatives of big companies with pay-rolls exceeding 250 employees, as well as those companies that have defined their status as "bad" (31 percent). In fact, the problems depend on the sector and on the company's size. The lack of markets is the major obstacle for those employed in the manufacturing sector, as well as for the medium and large enterprises. And the disloyal competition and the lack of capitals impede the most the development of the companies that produce and import agriculture equipment, as well as those employed in the transport sector. It is worth mentioning that the corruption among state officials is a great obstacle mainly for those who work in the service and energy sectors. Exactly those two sectors generate huge turnovers and the preconditions for bribing there are therefore so big. All these impediments result in a decrease of the companies' turnovers (68%) and increase of the intercorporate debts. For the time being, the most commonly used means for fighting the crisis is freezing the salaries (38% of the companies) and cancelling investments that have once been planned (35 percent). Some corporate heads take radical measures such as job cuts, decreasing of the working time for part of the employees or forcing them to take unpaid leaves, as well as shrinking or even ceasing part of the company's operations. "Most of the companies that took part in the survey (58%) don't give any prognoses on the duration of the crisis in Bulgaria. A total 18% think that it will last between six months and one year. Those who see it lasting for one to two years account for 11% of the companies (they are mainly small ones, as well as those considering their status "very bad"). Just 5% of the companies expect the crisis to end within six months. There is interdependence between the companies' present status and the attitudes towards coping with the crisis. Those whose status is good enough are more optimistic and they are the only to think that there is no crisis at all," officials of the National Center for Study of Public Opinion commented. BANKER KAPE: Most of the companies that took part in the survey okay the suggestions of the Government, labour unions and the business for improving the country's business environment. The best received (87% of the companies) was the idea about cutting the term for VAT reimbursement. The restrictions for banks to unilaterally change the terms on the loans they extend are being backed by 82% of the surveyed companies. The connection of the information systems of the National Revenue Agency and Customs Agency was supported by 79% of the companies. Almost three-fourths of the surveyed companies have positive attitude towards the Government's intention to cut the insurances by 5% until 2013.
One-third of Bulgarian building firms shut as crisis rages
Around 1,500 of Bulgaria’s 5,400 construction companies have opted out of the industry registry in a sign they have closed their doors until the market perks up, Bulgarian Construction Chamber (BCC) chairman Simeon Peshov said yesterday after meeting regional development minister Rosen Plevneliev. Companies listed in the construction registry are eligible to compete for public procurements and large-scale infrastructure projects. The building industry suffered a hard blow by the economic meltdown, seeing orders plummet by a formidable 30-35% by September, according to BCC estimates. The industry is expected to absorb only BGN 12.5 billion this year in comparison with BGN 16 billion in 2008. Peshov said that Bulgaria’s building companies pin their hopes on projects funded by the EU’s operational programmes to keep them to life in 2010. They expect tough times in February and March but anticipate the first green shoots of recovery in April as EU-funded projects begin.
Crisis hit dairy farmers to get EUR 280 M EU aid in 2010
The EU will allocate an additional 280 million euro of subsidies for milk production in 2010, Agriculture and Food Minister Miroslav Naydenov said at a regular ministerial meeting of the EU Agriculture and Fisheries Council in Luxembourg on Monday, Naydenov's Ministry said. In November 2009, the EU Finance Ministers will approve a proposal for the allocation of an additional aid for the milk industry in 2010. Naydenov explained that EU Member States should provide the requisite resources in their 2010 budgets.It emerged that the aid will be distributed among the Member States. According to Naydenov, it is still unclear what part of it will be disbursed to Bulgarian farmers. The European Commission should therefore decide whether to allocate the money depending on the amounts of milk produced in each country or on a quota basis. In the latter case, Bulgaria would have to allocate an additional 2 million euro for supporting milk producers in 2010, which will be disbursed to milk producers early next year, Naydenov explained. Bulgaria got the right to purchase milk quotas from farmers who have lost their animals. The same goes for redistribution of quotas. All this should be done with money provided by the Exchequer, Naydenov explained. Yet, he would insist that quotas should be purchased with EU money.On Wednesday, the European Commission will vote on raising the de minimis state aid per farm from 7,500 to 15,000 euro. The Agriculture and Fisheries Council decided Monday that milk production should be regulated by the common EU framework of market mechanisms aimed at backing the milk industry in crisis conditions. Consequently, if a milk market crises occurs, the EC is entitled to take urgent decisions without the Agriculture and Fisheries Council's approval.A high-level group under the EC and the Agriculture and Fisheries Council will be formed to discuss the changes to the current EU milk policy after 2015.
Crisis on stock exchanges is over
The crisis on the stock exchanges has already calculated the drops in the real economy and is practically over. Investors have to capture the right moment for investments so that they start again piling up profits. This is the main message sent during the open lecture of Karoll investment company delivered in the Economics Faculty of Sofia University Saint Kliment Ohridski, FOCUS News Agency reports. Zhivko Rusev with Karoll company explains that the investment markets get ahead of the real economy in their development and movement. That’s why the 88% drop in the leading Bulgarian stock index SOFIX, which was accumulated over the past year, was affected by all negative processes expected in the real economy. on the background of 88%, in the first half of 2009 Bulgaria’s GDP shrank by 4.2% and SOFIX is already recording growth of approximately 83% after reaching rock bottom. In this situation investors have unique opportunities for attractive investments in Bulgaria and on the global stock markets, he said.
Bulgaria loses BGN 83 billion due to crisis
The global crisis pinched off 83 billion levs (1 euro = 1.95 levs) from Bulgaria's households, mainly due to the crash in real estate prices. "This amount represents 130 percent of Bulgaria's GDP," UniCredit Bulbank senior economist Kristofor Pavlov said in a roundtable discussion at the Euromoney Regional Finance and Investment Conference for South East Europe. "Ever since the beginning of the crisis, property prices in Bulgaria slid by 24%, and continue to dip," he added. In Pavlov's opinion, a recovery is likely no sooner than the second half of next year, when GDP is expected to go up. But still, UniCredit Group see a 2.5% downturn in Bulgaria's economy at the end of 2010. The crisis will grow to be felt as even more painful next autumn due to a rapid surge in the rates of unemployment. Unemployment will reach its peak 12 months after the Bulgarian economy "hits the bottom," which is currently the situation. This means that the loss of jobs will continue to reach its peak at the beginning of next winter, the economist explained. The crisis increases the savings of the Bulgarian households, which now put aside some 6%-7% of their incomes.Data shows that in Bulgaria an increase of the savings by 1% usually results in a drop-down of 300 million levs in the GDP, which means that the country's GDP goes down by 0.5%. The credit spread is narrowing which is another manifestation of the crisis. In the past months of 2009 the newly granted credits are by 70% less than they were in the same period of 2008.Most of them are actually re-negotiated existing loans which means that the current credit rates stand at 0%. The reason for this is not to be searched in the banks, which can ensure a credit growth of some 5%-6%, but in the low demand for credits, commented the expert of UniCredit Bulbank.The start of getting out of the crisis will happen where the crisis itself began in Bulgaria - the industry and not the domestic demand, experts from the bank believe. The sectors which will lead the economy out of the crisis will be agriculture and food productions, also the textiles and furniture industries. The main impulse for development will come from the development of infrastructure - the construction of roads and highways as well as the absorption of EU funds. Economists have calculated that if Bulgaria manages to absorb 100% of the planned EU funds for the country by 2013, the economy growth resulting of absorption of EU funds will be 4% every year.
Crisis slashes 20% of municipal project costs
The crisis has slashed 15% to 25% of the end-price of projects of 18 municipalities that have applied for EU financing under the regional development operational programme, deputy regional minister Lilyana Pavlova said. The free aid they will get will amounts to BGN 133 million instead of BGN 163 million. The reason is the drop in construction product prices.