BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 2 – 9 JULY 2010 )
Sections/headline briefs:
MACROECONOMY:
· Bulgarian-Vietnamese business forum to open in Sofia
· Bulgarian government wants to defend national interest on energy
· Bulgaria signed BGN 1.4 billion public procurement contracts in H1 2010
· Business Monitor International: Bulgaria’s electronics market remains shaky
· Bulgaria to construct its first 'rolling highway' terminal
- Bulgaria with EU highest broadband penetration growth
- M-Tel to introduce 42Mbps HSPA+ in Sofia by end-2010
· Renewables increasing share of energy generation in EU
· AES 670 MW power plant in Bulgaria to go on stream
INVESTMENTS:
· Catalan investors eye Bulgaria's Razlog
· Glass recycling plant to open near Sofia
COMPANIES:
· LG Electronics raises 2010 Bulgarian sales growth forecast to 20%
· E-waste recycler kicks off near Sofia
· Bulgarian giant Sopharma's export grows by 40% in 2010 H1
· Melrose to expand operations in Bulgaria and Romania, sell assets in Texas
· Bulgaria's Solarpro Holding sells Malko Tarnovo solar park to United Solar
· Seventy per cent of Bulgarian firms come across corruption in procurements
THE CRISIS:
· Scrap market slide continues
· Bulgaria's new car market collapses to 2003 level
· Bulgaria among EU states with sharpest drops in retail trade
· Bulgaria might face second real estate crisis
ANALYSIS:
MACROECONOMY:
Bulgarian-Vietnamese business forum to open in Sofia
A Bulgarian-Vietnamese business forum will take place in Sofia on Thursday, July 8, as part of the visit of a high-level delegation of Vietnam.The event will be opened at 11 am in the building of the Bulgarian Chamber of Commerce and Industry by Bulgarian Economy Minister Traicho Traikov and Vietnam’s First Deputy Prime Minister Nguyen Sinh Hung.Earlier on Wednesday, Vietnam's Deputy PM and Bulgarian Finance Minister Simeon Djankov signed an agreement for returning the Vietnamese debt to Bulgaria.The Bulgarian Economy Ministry has announced that 20 Vietnamese companies from fields such as transport, steel-making, oil industry, food production, and banking will take part in the joint forum because of their interest in Bulgaria’s strategic geographic location and its potential, including thanks to the ports of Varna and Burgas, to become one of the major transit hubs connecting Asia and Europe.Bulgaria has a negative trade balance with Vietnam. The bilateral trade amounted to EUR 64 M in 2010 and is largely formed by joint ventures producing fruit juices, beer, and pharmaceuticals in Vietnam and textiles, shoes, and coffee in Bulgaria.Bulgaria exports to Vietnam lead, wheat, antibiotics, weaving machines, printing machines, insecticides, and imports coffee, fish fillet, coal, and some consumer goods.The Bulgarian government believes there is a potential to increase exports to Vietnam of metallurgy machines, wines, medicines, food, and irrigation equipment.Back in 2008, as the overheated Bulgarian economy started suffering from a shortage of skilled workers, there was a lot of talk in Bulgaria of "importing" Vietnamese laborers; such plans were precluded by the economic crisis, which led to a rise of unemployment and reduced economic activity.
Bulgarian government wants to defend national interest on energy
The present Bulgarian government has expressed its clear commitment to defending national interest in energy matters and in relations between Bulgaria and Russia, said a leading Bulgarian political analyst Monday. According to Ognyan Minchev, speaking in an interview for Bulgarian National TV, there is a certain incompatibility between the interests of Bulgaria and Russia in the energy sphere, because for Russia the energy question is not only economic, but also strategic. The right-leaning commentator stated that Bulgaria should not confine itself to one energy supplier and should strongly seek diversification. Minchev suggested that contracts on gas delivery with Russia should be “unbundled”. Regarding future big energy projects with Russia, Minchev said he considers the Burgas-Alexandroupolis oil pipeline as unfavorable for Bulgaria, while he thinks that the South Stream gas pipeline can be favorable, if renegotiated. He was unclear about his support of projected Belene NPP, though not overly favorable, which is still a change from a previously voiced negative position. Minchev admitted that there is some going back and forth in the positions of Bulgarian PMBoyko Borisov and energy minister Traicho Traikov, but he was firm that it is clear that the cabinet is bent on defending Bulgaria's authentic national interests. In an aside about the anniversary of GERB's landslide victory on the July 5, 2009, Ognyan Minchev was more critical. He commented that it is outside all doubt that GERB is not an alternative public movement, but rather an alternative clique servicing particular private interests. Nevertheless, compared to the previous three-way coalition cabinet, there is much more will that things happen the right way, according to Minchev. Russia’s Deputy Prime Minister Viktor Zubkov will meet Bulgarian PM Borisov Tuesday for talks on the large-scale joint energy projects – the Burgas-Alexandroupolis oil pipeline, the South Stream gas transit pipeline, and the Belene Nuclear Power Plant. A delegation of Bulgarian experts is going to visit Moscow Thrusday, July 8, for energy talks with Gazprom.
Bulgaria signed BGN 1.4 billion public procurement contracts in H1 2010
Bulgaria signed public procurement contracts worth 1.4 billion leva in the first six months of 2010, 1.5 billion leva less than in H1 2009, according to Public Procurement Agency (PPA) data."The decrease in public procurement spending will have a dramatic impact on businesses, for whom this is a key source of financing at the moment," Kamen Kolev, deputy chairman of the Bulgarian Industrial Association (BIA), said.Kolev said that even though the Government delayed payments, it was the most reliable debtor in making payment to Bulgarian companies.A total of 6329 public procurements were successfully completed in the first half of 2010, which was 1 377 less than in H1 2009.
As in 2009, the bulk of the contracts involve small procurements worth less than 50 000 leva for the provision of services. A further 46 contracts were awarded 61 million euro, down 138 million euro, and seven more worth $ 947 000."The smaller number of public procurements in the public sector whipped up fierce competition in the building industry and prices at tenders are being reduced ," Simeon Peshov, president of construction company Glavbolgarstroy, said recently.Currently the only available infrastructure financing programme is Regional Development Operational Programme. The tenders for the construction of the Trakiya Highway, financed under the Transport Operational Programme, have been completed.The cutback in the public procurement volume means less jobs for companies and a spike in unemployment, according Svetoslav Glosov, chairman of the Bulgarian Construction Chamber.
Business Monitor International: Bulgaria’s electronics market remains shaky
Bulgaria’s consumer electronics market will remain unsteady in 2010 despite signals of a gradual recovery, according to global research outfit Business Monitor International (BMI) and a poll by Dnevnik among market members.According to BMI’s latest revised report, Bulgaria’s consumer electronics sector will generate turnover to the tune of $1.2 billion, a $200 million reduction of the end-2009 forecast. In 2009, turnover amounted to $1.1 billion, according to BMI.The market will remain tight in the first half of the year as growing unemployment and lower income press consumers, the report says.The expectations of some of the major consumer electronics chains operating on the Bulgarian market were also mixed."Indeed there was a drop in the first half of the year," said Nikolay Kitov, manager of Technomarket, blaming it on the poor shape of companies of the economy. "Individual consumption cannot keep the entire market going," he said."Recovery in the second half of the year will offset the slight decline from the first," Technopolis executive director Bozhidar Kolev said. on an year-on-year basis, I expect an increase or at least no decrease."In June 2010, television set purchases were boosted by the 2010 FIFA World Cup.Computer equipment chain Multirama said turnover had improved in the first six months of 2010.BMI expects that sales of PCs, netbooks and accessories will hit $636 million in 2010, up 1.6 per cent on the 2009 level.
Bulgaria to construct its first 'rolling highway' terminal
Bulgaria’s Transport Ministry has unveiled plans to construct two “Rolling Highway” or “Ro-La” terminals, a combined system allowing the transport of trucks by rail.The first such Rolling Highway terminal will be constructed at the train station at the town of Dragoman in Western Bulgaria, which is located between Sofia and the Serbian border on the major European Transport Corridor No. 10. Bulgaria’s Transport Minister Alexander Tsvetkov is going to break the ground for the construction of the Ro-La terminal on July 6, 2010.The infrastructure project will cost BGN 6 M, which are provided by National Company “Railway Infrastructure” and will be carried out by another state company, “Transport Construction.”A second Bulgarian Rolling Highway terminal is planned to be constructed at the train station of the town of Svilengrad in the southeast near the Turkish border, which is also located on the No. 10 Transport Corridor.Rolling highway is a term originating from the German designation "Rollende Autobahn", also known as "Rollende Landstrasse"/"rolling country road" or abbreviated "RoLa". It is said to have a number of economic and environmental advantages.
Bulgaria with EU highest broadband penetration growth
Bulgaria leads the EU in broadband penetration growth with an annual growth rate of over 228%, but ranks at the bottom in terms of market development, data shows, as cited by Maars News.The closest competitor, the Czech Republic is 40 percentage points behind at 181.8%.For overall uptake, Denmark and the Netherlands came in a virtual tie for the Europeanbroadband penetration crown at 37.1%.With its faster growth rate, the Netherlands is poised to pass Denmark to have the highestbroadband penetration in Europe.Bulgaria has the sixth fastest upload speed in the world, standing on average at 9,11 Mb/s, according to a survey, conducted by Speedtest.net, which has been running tests of connection speeds since 2007. South Korea leads with an average of 18.04 Mb/s, followed by Latvia, Moldavia, Japan and Sweden. The United States is listed with 2.21 Mb/s, slightly ahead of the average of 2.10 Mb/s.The list shows a similar picture in download speeds, where Bulgaria ranks at number eight with an average speed of 17,72 Mb/s.
M-Tel to introduce 42Mbps HSPA+ in Sofia by end-2010
Bulgarian mobile carrier M-Tel demonstrated download speeds of 42 Mbps reached via Dual Carrier HSPA+. The technology will be introduced in Sofia by the end of this year, doubling the current maximum download speed of 21 Mbps. Thanks to the 42 Mbps download speed, the customers of M-Tel will be able not only to surf the internet at high speeds, but also watch 3D and HD TV channels through the mobile network. With the new Dual Carrier HSPA+, it will take about two and a half minutes to download a 750 MB movie, compared to four hours and 45 minutes via UMTS. With the HSPA+ technology, a movie of the same size would be downloaded in five minutes and 16 seconds. M-Tel introduced the HSPA+ technology which provides speed for data transfer up to 21 Mbps last year in Sofia. By the end of August, HSPA+ will also be available in Varna, Plovdiv and Burgas.
Renewables increasing share of energy generation in EU
Renewable energy sources accounted for 62 per cent (17GW) of the new electricity generation capacity installed across the 27 member states of the European Union in 2009, an increase from 57 per cent in 2008, according to a European Commission report. According to the "Renewable Energy Snapshots" report, published on July 5 2010 by the European Commission's Joint Research Centre (JRC), for the second year running, wind energy accounted for the largest share of the new capacity: 10.2 GW out of the 27.5 GW built, representing 38 per cent of the total.In absolute terms, renewables produced 19.9 per cent of Europe's electricity consumption in 2009, the report said.In 2009, and in absolute terms, about 19.9 per cent (608 TWh) of Europe’s total electricity consumption (3042 TWh) came from renewable energy sources. Hydro power contributed with the largest share (11.6 per cent), followed by wind (4.2 per cent), biomass (3.5 per cent), and solar (0.4 per cent).With regards to the new capacity constructed that same year (27.5 GW), among the renewable sources, 37.1 per cent was wind power, 21 per cent photovoltaics (PV), 2.1 per cent biomass, 1.4 per cent hydro and 0.4 per cent concentrated solar power, whereas the rest were gas fired power stations (24 per cent), coal fired power stations (8.7 per cent), oil (2.1 per cent), waste incineration (1.6 per cent) and nuclear (1.6 per cent).
If current growth rates are maintained, in 2020 up to 1400 TWh of electricity could be generated from renewable sources, the report said.This would account for about 35 to 40 per cent of overall electricity consumption in the EU, depending on the success of community policies on electricity efficiency, and would contribute significantly to the fulfilment of the 20 per cent target for energy generation from renewables.However, the report also advises that some issues need to be resolved if the targets are to be met.Particular areas of focus include ensuring fair access to grids, substantial public R&D support, and the adaptation of current electricity systems to accommodate renewable electricity. The study highlights that cost reduction and accelerated implementation will depend on the production volume and not on time.
AES 670 MW power plant in Bulgaria to go on stream
U.S. power group AES plans to bring on stream its 1.3 billion euro 670-megawatt power plant in Bulgaria by the middle of October, Sofia-based media reported on Thursday.The first electricity generation unit of coal-fired plant AES - 3C Maritsa East 1 will be launched by mid-September and the second - by mid-October, state-run news agency BTA quoted the plant's CEO as saying.AES broke ground for the project in June 2006 but technical problems delayed construction works.The power station is part of the country's largest energy complex Maritsa East, located in the southeastern region of Stara Zagora. The complex hosts lignite coal mines and two more coal-fired power plants.AES - 3C Maritsa East 1 is expected to shore up Bulgaria's energy balance after the closure of two pairs of reactors at the country's sole nuclear power plant Kozloduy that had a combined capacity of 1,760 MW. Bulgaria, which joined the EU in 2007, is due to shut down 1,800 MW of outdated installed capacities in the coming years to address environmental concerns.Earlier this year AES (www.aes.com) said it plans to build a 80 megawatt solar park near the town of Silistra, in northeastern Bulgaria. The company also runs two wind farms in the Balkan country.In May, AES said it was interested in buying the majority stake in Bulgaria's Maritsa East 3 power plant owned by Italy's Enel.
INVESTMENTS:
Catalan investors eye Bulgaria's Razlog
Dozens of Catalan investors are scheduled to arrive to the Bulgarian mountain resort town of Razlog at the initiative of the Bulgarian-Catalan Chamber of Commerce (BGCAT).The visit of the entrepreneurs, traders, and owners of infrastructure and tourism companies from Catalania to Razlog, located right near Bansko in the Pirin Mountain, was announced Friday after a meeting of BGCAT Chair Manel Riera with the Razlog Mayor Krasimir Gerchev.“Bulgaria is a very interesting country, I really like Razlog and the entire region. You have my word that I am going to presentRazlog to all Catalan and Spanish firms that turn to the Bulgarian-Catalan Chamber of Commerce to ask us for recommendations about where to invest in Bulgaria. This is a commitment on my part,” Riera told the Razlog Mayor.He has also stated that he was impressed with Gerchev’s vision for the development of the entire Razlog regionThe Catalan business delegation in September will be welcomed to Razlog within a “Mountain Conference” which is supposed to become an annual business forum.“As hosts, we have taken all measures to make sure that we will be able to help the foreign investors in any way needed with their projects. Any person living in this part of Bulgaria should be able to have the same opportunities as a person living in the capital Sofia. This must be the basis of our regional and national policies. The thing that Razlog lacks the most is a fast transport connection with Sofia,” said in turn the Razlog Mayor Gerchev during a joint news conference with Riera.The head of the BGCAT Manel Riera has been living in Bulgaria for three years. He has been an advisor to three ministers in the former government of Catalonia.
Glass recycling plant to open near Sofia
Bulgaria's Environment Minister Nona Karadzhova has broken the ground for the construction of a glass recycling plant in the village of Ravno Pole near the capital Sofia.The Ecopack, a joint stock company that does not distribute its profit formed in 2004 by 18 Bulgarian and foreign firms, is going to invest BGN 3.8 M in the glass recycling facility.The plant is going to use empty bottles from around Bulgaria; the recycled glass material will be provided to two glass producing plants.The future factory will have a capacity of 50 000 tonnes of bottles annually. These will come in three ways – from the special containers for recycling around the country, from bottling companies, and from commercial units such as restaurants.The currently existing system for separation and recycling of household waste in Bulgaria features 22 000 containers in 101 municipalities with more than 3 million people.
COMPANIES:
LG Electronics raises 2010 Bulgarian sales growth forecast to 20%
LG Electronics said on Tuesday it hoped to increase its sales in Bulgaria by up to 20% this year, raising its previous forecast for a 12% rise despite local market stagnation."I believe we can achieve a rise in total sales of up to 20% in 2010 even in time of crisis and constant dynamics," the company's managing director for Bulgaria, Ivan Ivanov, said in a statement.The company said in December it expected a 12% rise in sales this year.LG also said that its share on the Bulgarian market of TV sets increased by 29% year-on-year in the first six months of 2010 despite the market stagnation."We are proud that LG Electronics is stable in holding the first place in sales of plasma TV sets in Bulgaria with a market share of over 40%, while in the segment of LCD TV sets we reached 30% of the market," Ivanov said."The good results were achieved amidst continuing stagnation on the electronics market and fall in sales which in some segments reached 15-20 percent."The ongoing 2010 FIFA World Cup in South Africa has given a boost to the sales of TV sets, he added.LG Electronics' market share in the cell phones segment rose by an annual 30% to 13% at the end of June, while its sales in this segment doubled, the company said without providing figures. LG's sales of IT products increased 32% on the year through June, while sales of air conditioners increased 12% over the review period.LG Electronics opened its trading unit in Bulgaria in March 2006.LG Electronics (www.lge.com), headquartered in South Korea, was set up in 1958. It is a global leader and technology innovator in consumer electronics, mobile communications and home appliances, employing more than 82,000 people in 82 representative offices globally. It has five business units - Home Entertainment, Mobile Communications, Home Appliance, Air Conditioning and Business Solutions.
E-waste recycler kicks off near Sofia
The company can cover the needs of electronic garbage processing in Bulgaria and neighbouring countries Everyone already knows that garbage makes money, but the truth is that it makes a lot of money. No wonder why the battle for the Sofia garbage has been severe. But while the situation there is more or less known, few people are aware of what is happening with the so-called electronic waste that is the most profitable segment in waste (bringing together old and useless television sets, washing machines, refrigerators, personal computers, printers, gaming consoles, mobile phones, microwave ovens and so on). Judging by recent studies, the global market for recycled electronic and electrical equipment will reach the amazing USD14.7 billion in 2015, given that last year the amount was USD5.9 billion. Besides, this sum is only for the revenue generated from selling the useful materials from electronic scrap. The rapid expansion of this business segment is due mostly to the increased efficiency of recycling technology and accompanying legislative changes. Electronic waste is said to be the fastest growing component of the generated waste worldwide, with its volume in 2009 exceeding 55 million tonnes. In Bulgaria, according to the Executive Environment Agency, nearly 38 tonnes were collected in the same year, but certainly unnecessary equipment is much more than that. Most people either dispose of it in the usual waste containers in front of their homes, or just keep it in attics or basements. Just another proof for the potential of this business segment came on 28 June when Nadine company, which deals with the extraction and marketing of ferrous and nonferrous metals from scrap, opened its first factory in the country for recycling of electrical and electronic equipment. It has invested over BGN40 million in the facility, located in Novi Iskar near Sofia. The company has taken a loan to cover its initial expenses and hopes to generate an annual profit of BGN 7 million. Moreover - the capacity of the plant is sufficient to cover the volume of waste equipment not only in Bulgaria but also in neighbouring countries and is now in negotiations with some of them over accepting their old appliances. Currently the company has a contract with Ekobultech, which according to its report, managed to collect 1.19 tonnes of waste in 2009. Nadine can recycle about 60 refrigerators and 80 TV sets per hour. The process is fully automated and the servicing of machines created only 25 jobs. Moreover, the company produces its own electricity and the cost of processing one tonne of scrap has been reduced to about BGN20. Unusable materials are only between 5 and 8 percent.
Bulgarian giant Sopharma's export grows by 40% in 2010 H1
The export of Bulgaria's largest pharmaceutical company Sopharma has seen a substantial growth of 38% in the first half of 2010.Only in June 2010, the company's exports grew by 66% compared to the same month of 2009, it has announced.Sopharma's total sales have grown by 42% in June, with a 2% increase of the sales on the Bulgarian market.The total sales for the first six months of 2010 grew by 23% year-on-year., with the sales on the Bulgarian market retaining their level from the first half of 2009.During their meeting in June 2010, the shareholders of Sopharma decided to buy back the company shares, and against allocating dividends because of the economic uncertainty.The Bulgarian pharmaceutical giant Sopharma is responsible for the overwhelming share of the combined turnover of Bulgarian pharmaceutical producers. Its sales in the first quarter amounted to BGN 138.6 M, a 22% increase compared to the same period of 2009. Its profit increased by 31% year-on-year, reaching BGN 12.7 M, with the revenue fromexports to Ukraine growing 2.5 times, and to Turkey – twofold. Its export to Central Asia and the Caucasus grew by 9%, to the USA – by 23%, and to Singapore – by 5%.
Melrose to expand operations in Bulgaria and Romania, sell assets in Texas
The Edinburgh-based Melrose Resources said in a media statement that it will focus its oil exploration activity on prospects in Bulgaria, Romania and Turkey. The Jupiter jack-up rig has been mobilised to the Galata block, offshore at the northern coast of Bulgaria, and started drilling operations on the Kavarna, the media statement said. Reportedly, the well will test a low-risk prospect between the Kavarna and Kaliakra fields and which contains gross recoverable prospective resources of 12 Bcf and a chance of success of about 80 per cent. "We are delighted to have been the successful bidder for two high-quality exploration blocks offshore Romania and this represents an important milestone for the company as we seek to establish the country as a long-term core investment area," David Thomas, Melrose Resource's chief executive, said.In the event of success, the discovery would be developed at minimal cost via the Kavarna field flow line.Melrose has won the right to explore in 2000 sq km of Black Sea shallow waters off the coast of Romania. This includes one area where oil has been discovered but not extracted.On June 30 2010, the Romanian authorities announced the results of the Romanian 10th licensing round, hence notifying Melrose that it was the successful bidder for two shallow water blocks, notably EX-27 and EX-28. The Scottish company had bid for the blocks in partnership with Petromar Resources S.A. and will hold an 80 per cent working interest in the concessions. Melrose plans to spend 40 million pounds sterling over the first three years of the concession.According to the media statement, it was also announced that in parallel with extending the scope of operations in Bulgaria, Romania and Turkey, Melrose is looking to sell its interests in Texas and New Mexico within the next nine months.
Bulgaria's Solarpro Holding sells Malko Tarnovo solar park to United Solar
Bulgarian vertically integrated holding company Solarpro said on Tuesday it has sold its solar park near Malko Tarnovo, in the country's southeast, to local company United Solar.The project will absorb total investment of 8.0 million euro ($10.1 million), Solarpro Holding said in a statement.The investment figure includes the deal price, Solarpro Holding's investor relations officer Boyan Bakardjiev told SeeNews, but did not elaborate.Solarpro is going to be in charge of the operation and maintenance of the park once it is completed, the statement said.The solar park in Malko Tarnovo, which will have a capacity of 2.4 megawatts-peak (MWp), is sited on reclaimed industrial land with an area of 112,000 square metres. It is expected to be fully completed and connected to the country's electricity grid by the end of 2010.Earlier this year, Solarpro Holding started deploying a 5.0 MWp solar power capacity near Devnya, in northeast Bulgaria.Last year, it completed the construction of a solar plant in the village of Yankovo, in northeastern Bulgaria, delivering an installed capacity of 2.4 MWp.The company (www.solarpro.bg), set up in 2007, also has a photovoltaic (PV) panel factory in Silistra, on the Danube river.Solarpro Holding has said it will aim to become a leader in PV panels manufacturing in Europe and the largest system integrator of PV power plants in Bulgaria and the neighbouring countries.The holding company's three main lines of business span manufacture and installation of PV panels, production of technological equipment for PV panel manufacturers and construction, operation and maintenance of PV power plants and other renewable energy generation facilities.Solarpro Holding is controlled indirectly by Bulgaria's Alfa Finance Holding with a 85.5% share alongside minority shareholders Nikolay Berov (6.5%) and Rumyana Georgieva (6.5%).Solarpro Holding shares started trading on the Sofia bourse last month, but have so far have failed to draw investor interest.
Seventy per cent of Bulgarian firms come across corruption in procurements
Public procurements in Bulgaria leave opportunities for corruption and most local businesses teeter on the verge of the law in completing procedures, according to research by the Bulgarian Industrial Association (BIA).The report, prepared in partnership with private cultural non-profit institution Friedrich Ebert Foundation (FES), also found that 70 per cent of all 3520 companies have encountered corruption and a further 85 per cent believe that public procurement procedures are unfair and corrupt.Half the respondents said Bulgaria’s public procurement registry, maintained by the Public Procurement Agency (PPA), does not provide adequate information to businesses.A check by Dnevnik found that the PPA’s portal is not available over the weekend. The body blamed this on technical issues.A mere 10-20 per cent of all public procurements held in Bulgaria have been awarded to local companies, and the others are won by foreign organisations, said BIA chairman Bozhidar Danev.In contrast, local businesses get 70-80 per cent of all contracts in other EU member countries such as the Czech Republic and Estonia.The main obstacle for Bulgarian companies are the requirements outlined in the participation papers.only 50 per cent of the requirements match the criteria for similar procurements in other countries, the others have been added artificially," Danev said.Yosif Avramov, deputy chairman of the National Chamber of Entrepreneurs and Craftsmen, said that a major challenge for Bulgarian businesses participating in public procurements is the mismatch between the requirements for low cost and high quality.
THE CRISIS:
Scrap market slide continues
The Bulgarian market for scrap ferrous and non-ferrous metals continued to deteriorate in 2010 after a drop of 264,000 tonnes in ferrous metals for 2009, showed figures by the Bulgarian Association of the Metallurgical Industry (BAMI). This compares with 503,000 tonnes a year earlier. The bulk of the used ferrous metals imported into Bulgaria in 2009 came from Romania, whereas exports were focused on Turkey, Greece and Macedonia. The average price was USD 253 per tonne for exports and USD 254 per tonne for imports. For comparison, the figures were a respective USD 429 and USD 473 in 2008. The shrinking usage of scrap is a negative trend as it has environmental consequences and is a sign that the industry is losing ground, according to experts.
Bulgaria's new car market collapses to 2003 level
Only 7 165 new cars were sold in Bulgaria in the first five months of 2010, which roughly equals the sales for the same period of 2003.According to data of the Union of Car Importers, the number of new cars sold in Bulgaria in January-May 2010 has declined by 42.4% year-on-year.The Bulgarian new car market does show a modest monthly growth as 1 813 new cares were sold in May 2010 compared to 1 478 in April.The major factors for the staggering decline have to do with Bulgarians’ uncertainty about their income and the reduced availability of crediting, according to leading car industry experts as cited by the Pari Daily.The growth of “easy loans” in the years before 2008 has been described as the main cause of the boom of the Bulgarian new car market in the pre-crisis period.The car traders have slammed the Bulgarian government for failing to introduce limits on the use of old and second-hand cars, and to promote environment-friendly vehicles.
Bulgaria among EU states with sharpest drops in retail trade
Bulgaria was among European Union states that saw the sharpest declines in retail trade, as measured on an annual basis as of May 2010, EU statistics office Eurostat said on July 5 2010. In May 2010, compared with April 2010, the volume of retail trade decreased by 0.4 per cent in the 16-member euro zone, but remained stable across the 27 member states of the EU. In April, retail trade fell by 0.9 per cent and one per cent, respectively. In May 2010, compared with May 2009, the retail sales index declined by 0.9 per cent in the euro area and by 0.4 per cent in the EU27. Monthly changes. In May 2010, compared with April 2010, the category food, drinks and tobacco fell by 0.5 per cent in the euro area and by 0.1 per cent in the EU27.The non food sector decreased by 0.1 per cent in the euro area, but rose by 0.1 per cent in the EU27.Eurostat said that, among the EU member states for which data are available, total retail trade increased in 13 and declined in six. The highest increases were in Denmark (3.8 per cent), Poland(3.5 per cent) and Estonia (1.7 per cent), and the largest decreases in Malta(-3.8 per cent) and Portugal (-0.8 per cent).Annual changes. In May 2010, compared with May 2009, food, drinks and tobacco fell by 1.1 per cent in both the euro zone and the EU27. The non food sector declined by 0.3 per cent in the euro area, but rose by one per cent in the EU27. Among EU member states for which data are available, total retail trade decreased in 12, rose in six and remained stable in Slovenia. The largest decreases were observed in Lithuania (-10.7 per cent), Bulgaria(-8.7 per cent) and Latvia (-8.4 per cent), and the highest increases in Sweden and the United Kingdom (both +2.3 per cent) and Finland (+1.8 per cent).
Bulgaria might face second real estate crisis
The real estate agency “Bulgarian Properties” has announced a possible second crisis in the real estate market, a report from the agency for the second quarter of the year has showed.“It is very possible for the European economy, including the Bulgarian economy, to face a second crisis, which this time would be triggered by the worsen fiscal situation on a local level. In this case scenario, we will face a second crisis in the real estate,” the report said. According to Polina Stoykova, the Operations Director of “Bulgarian Properties”, the real estate market is very dynamic and is reacting immediately to all economic and political news and tendencies. “The insecurities about the government's anti-crisis measures and the contradicting signals for the tax policies had a negative effect on the real estate market in May. There was also a decline in the search of properties in Bulgaria by foreigners because of the crisis in Greece and the threats for the European economy,” Stoykova said. “Bulgarian Properties” believes that the record low volume of sales, similar to the lowest one in the beginning of the crisis, is connected to the Bulgarian Stock Exchange, which, according to them, has also had a low turnover in May. According to Stoykova, the next few months will show the direction in which the real estate market will go until the end of the year.“The real estate market is a complete opposite to what is happening every consecutive month from the beginning of the year, which makes us believe that the recovery will not be as stable and smooth as we have planned,” she said. “Bulgarian Properties”'s report accounted an increase in the volume of sales in March and in April reached “record high levels” from the beginning of the year. In May, however, in comparison to April, the agency faced a “drastic drop by 60% in the sales from all over the country”, the report says. In June, the volume of sales have reached the level of March and April 2010 and June 2009, which was one of the most profitable months for the real estate market last year, according to the agency. “Activity- and price-wise, the market went back to the levels in 2009,” Stoykova said. She noted that the average price for apartments in Sofia, sold in the second quarter of 2010, was EUR 870 per sq.m, which was the lowest average price for “Bulgarian Properties” since the beginning of the crisis. The report shows a drop by 16% in the prices, in comparison to the first quarter of 2010, when the average price was EUR 1040 per sq.m. During the second quarter of 2009, the average price was EUR 1020 per sq.m, which means that “Bulgarian Properties” experienced a drop by 15%, year-on-year. According to the data, there is also a difference in the size of the sold properties. In 2010, the average price of an apartment is EUR 86 000, while a year ago the price was EUR 66 600. In 2009, people have been buying small apartments of around 60 sq.m. for the average price of EUR 1020 per sq.m. In 2010, people spend more money on properties in Sofia and bought larger apartments of around 100 sq.m. In the first quarter of 2010, properties in the luxury segment have been sold for the average of EUR 119 300, with EUR 1 200 - 1 400 per sq.m. In the second quarter, about 50% of the real estate deals have been in the low pricesegment with the average of EUR 35 000, with EUR 500 – 600 per sq.m. The volume of sales in Sofia for the second quarter of 2010 is relatively stable on a monthly basis from the fall of 2009. The average rental price of apartment in Sofia for the second quarter of 2010 is EUR 480. This is a raise by 20% in comparison to the first quarter when the average rental price was EUR 400. However, the volume of the rental deals in the second quarter has dropped by 26% in comparison to the first quarter of 2010.
ANALYSIS:
Bulgaria in a bind
Provider: Bne Media Ltd.
Author: Andrew MacDowall
Renewed pressure on European economies has brought more bad news for Bulgaria, just at a time when the fabled green shoots of recovery appeared to be emerging. While the "crisis" may not be as drastic as some of the headlines suggest, more challenges lie in store for the government. On July 6, the European Commission issued an ultimatum to Bulgaria to cut its budget deficit to within 3% of GDP as the EU executive seeks to fire fight the fiscal crisis that's spreading across the continent. Following the 110bn emergency package issued by the EU and International Monetary Fund (IMF) to Greece agreed in May, serious concerns have been growing about the fiscal situation in a number of EU countries. Portugal and Spain are seen as the countries most likely to follow Greece down the road to a bailout, while Hungary's own government has made statements suggesting it might default on its debt. The UK's new administration has issued an emergency budget to repair the holes left in the national accounts left by its predecessor as the country plunged into recession, and even prudent Germany is taking the axe to its public expenditure. Against this bleak backdrop, it was bad timing for Bulgaria to have issued a revised budget in June, in which the expected budget deficit was substantially raised from 0.8% of GDP to 3.8%, despite wide-ranging spending cuts already announced. The Commission's call raises serious questions for Bulgaria and Prime Minister Boyko Borisov's centre-right government, which had previously won plaudits for its economic plans after winning a landslide victory last July. The EU will despatch officials from Eurostat, its statistical body, to Sofia in September to investigate Bulgaria's accounting methods, having announced that it had "doubts about the methodology" being used, given the discrepancy in forecasts. This is something of a PR blow against Bulgaria, given that the revelation of Greece's own questionable methodology (and that's being charitable) or mis-reporting (rather less so) of its economic figures was a key factor in the rapid loss of investor confidence. Borisov, however, would do well to point out that he was in part relying on statistics generated under the previous Socialist-led regime, which left office under a dark cloud.
Bygone days
The fiscal situation is certainly a setback for Bulgaria's image and its real economy. Since the IMF stabilisation programme of 1999, the country has established admirable fiscal and monetary stability, with successive governments adhering to strict budgetary targets and the lev locked into a currency board with the euro. While corruption and organised crime as well as low productivity have been persistent challenges, until recently Bulgaria was consistently running a budget surplus of around 3%. It will take some time and hard decision-making to return to those days. The government has forecast 1% GDP growth for this year, sluggish at any time but particularly weak after last year's deep recession, and with living standards still lagging well behind Western and Central Europe. Further cuts in spending could imperil that weak recovery and the Bulgarian newspaper Standart reported that real estate brokers are now raising concerns of another crash, following that already experienced in the country as foreign investment in property, previously a major economic driver, slowed to a near standstill. Should the situation worsen and a double-dip recession looms, calls will grow for Bulgaria to devalue the lev to boost its flagging external competitiveness and encourage investment and exports. However, the Bulgarian National Bank has consistently rejected the idea, and with euro membership a long-term goal and currencies vulnerable to fluctuation, this would seem an unlikely move. So it remains to be seen what Borisov's next move will be. The original budget, which proposed paring down the public sector, was widely welcomed by analysts but reinvigorated a battered opposition. Now his government faces accusations of incompetence. These are particularly likely to be levelled at his technocratic ex-World Bank finance minister, who at the presentation of the original budget infamously posed with a small, meatless pizza to demonstrate the fiscal diet that his countrymen would have to swallow. The right-wing Union of Democratic Forces (DSB), previously close to Borisov, has now broken ranks, stating it will oppose the revised budget while warning that tax rises and spending cuts are necessary, while an IMF bailout is on the cards. Borisov has refused to raise taxes, currently at a flat 10% on income, for fear of choking off growth. If he sticks to this, he has little choice but to make further inroads into spending if he's to hit the budget deficit target recommended by the Commission, IMF and World Bank in recent weeks. It is admittedly a rather bleak picture, but the Commission's harsh criticism should be put into the perspective of its eagerness to halt fiscal contagion and get the European project back on track. In June, the World Bank praised Bulgaria's progress, while the IMF noted that necessary reforms were being made. World Bank President Robert Zoellick wrote to PM Borisov stating that, "we have been impressed with Bulgaria's commitment to fiscal discipline and prudent management of external debt." Throwing the World Bank's support behind the government's public sector reform efforts, he added that, "we recognize these steps have been difficult, we hope they will position Bulgaria to make the best possible gain from the recovery." The message is not, therefore, "steady as she goes" and it will be some time before Bulgaria is back on an even keel. The government will have to wield its mandate to make unpopular decisions, particularly to reform the top-heavy public sector and to boost productivity - easier said than done. Bulgaria's proximity to Greece hasn't yet made it another of Europe's sick men, but that could change.