BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 6 – 13 AUGUST 2010 )
Sections/headline briefs:
MACROECONOMY:
· Bulgaria's Varna Port ready for concession by 2011
· Industry Minister: Serbia еager for Bulgarian Belene NPP
· The Bulgairan economy forecast
· Bulgaria's Export to EU Up 12% Y/Y
· Bulgaria with staggering export growth to non-EU states in 2010 H1
· Bulgarian industrial production up 3.6% year-on-year in June
· Bulgaria-Greece: Pipe dreams
· New car sales fall 38.4% y/y in Jan-Jul
INVESTMENTS:
· AES to invest EUR 4.3 M in Bulgarian town
COMPANIES:
· Vorskla Steel Bulgaria may bid for Kremikovtzi`s assets
- Chinese CBMI and Strabag to work on EUR 160 М cement plant modernization
MACROECONOMY:
Bulgaria's Varna Port ready for concession by 2011
The Bulgarian government is conducting a thorough analysis of the possibility toconcession the port of the Black Sea capital Varna, Transport Minister, Aleksander Tsvetkov, informs. Tsvetkov, who visited the city Saturday, pointed out the analysis includes the ferry port and the terminals of Varna-Zapad (West) port. The report will be ready in the fall, most likely by the end of September, when theconcession conditions will become clear while the procedure itself will be launched by the end of the year. The port’s concession is part of the general concession strategy of the Transport Ministry, which includes several facilities from the country’s transportation network. A total of 10 such facilities are going to be prepared for concession this year, including 5 of the country’s largest railroad stations – the Central Station and Poduene in the capital Sofia, and the ones in Varna, in the second largest city of Plovdiv, and the other Black Sea city of Burgas. Tsvetkov says that the idea of his experts is to combine the railroad stations with bus stations where possible.
Industry Minister: Serbia еager for Bulgarian Belene NPP
Serbian Minister of Industry Petar Skundric told the Tanjug agency that participating in the construction of the future Belene NPP in Bulgaria will prove good for Serbia. He specified that the Belene NPP project is of “regional significance” and said that opportunities for Serbia to receive good loans from abroad will help its participation. Skunric was referring to recent interest expressed by the China Development Bank to finance Serbia's participation in the project. He specified that if Serbia is going to participate with only a few percent in Belene, then financing will come from Serbian power company Elektroprivreda Srbije, but if theinvestments reaches 25% and more, the country will have to rely on Chinese capital. Skundric added to that that there are also opportunities for loans from Russia, which is anyhow strongly interested in the project too. The Serbian minister said that his country can benefit from the power capacity of the future NPP, which is going to provide “clean and cheap” energy to the country, and will in additional provide an opportunity to train Serbia's own nuclear engineers. He nevertheless added that the final decision to participate or not will depend on the energy balance and the value of the capital in the project. Monday Serbian newspaper Vecherne Novoste quoted a source from the Serbian government saying that the decision will be coming end of September of beginning of October. In other news, Tanjug quoted representatives of opposition Serbian Progressive Party, who claimed that building power capacities in another country is not good for Serbia's own power rescources, that it will only induce more state spending, and that it is intended in order to do service to Serbian mafia.
The Bulgairan economy forecast
Publication: Newstex Blogs
The Bulgarian economy will continue sinking in 2010. The decrease of the GDP will be of 1%, according to the Agency for Economic Analysis and Forecasts. For 2009 the expectations are of a significant decrease of the GDP of 6.3%. Bulgaria will be in recession for two consecutive years. The decrease of the investments and the retail index will continue in 2010. The expenses in Bulgaria's budget will not increase in order to avoid deficit. The major reason for this is the world wide recession. Although there have been signs for upcoming end to the recession in the USA, the risks for the world and the European economy are still there. The slowing down of the economies of Bulgaria's major trading partners has led to shrinking of Bulgaria's export. The export of goods has decreased by 30,7% in the first five months of this year and it is expected that the decrease will be 10,5% on an annual basis. This has its effect on the transport and freight. As result the total volume of the export will shrink by 12,3%. The limited crediting and the slow increase of the personal incomes has led to a decrease in the investments and the sales in the country itself. The expectations are that in 2009 the spending of the average household will shrink by 4.5% and of the government by 3%. In the following years the domestic demand, which has been generating mostly by the foreign investments, will be hard to resume the growth of the Bulgarian economy to the levels of the last years. That is why the recuperation of the economy is expected to materialise through the export. Having in mind the current world wide tendencies, this will not happen in 2010. To the contrary, the export will continue decreasing and the expectations are that it will shrink by 3,8% next year. That is why the forecast is for economic decrease of 1% in 2010. This will be accompanied by relatively low inflation about 2,2%.
Bulgaria's Export to EU Up 12% Y/Y
In January-May, 2010, Bulgaria’s export to EU Member States is up 12.3% year on year, according to data published by the National Statistics Institute (NSI) Monday.The export for the first 5 months of the year is BGN 6.3 B with Germany, Italy, Greece and Romania being Bulgaria’s main partners.Export for Germany is up 20%, for Italy – 18%. Export for Luxembourg, Estonia, Slovenia is up the most. Export to the Czech Republic is up 74%, to Denmark – 55%. The biggestexport decline is with Portugal, Belgium and Malta.In May, 2010 export for the EU is up 31% compared to May, 2009, reaching BNG 1.5 B.Meanwhile, import is up 0.4% during the first 5 months of 2010 and has been BGN 8 B. The largest increase is with Malta (68%) and Romania (47%), followed by Portugal, Latvia and Spain – all with more than 30%. The most significant decrease is import from Estonia, Sweden and Finland.In May, 2010 import from the EU is up 8% compared to May, 2009, reaching BNG 1.8 B.
Bulgaria with staggering export growth to non-EU states in 2010 H1
Bulgaria’s export to non-EU countries grew by 44.1% in the first half of 2010 year-on-year, according to preliminary data of the National Statistical Institute.Thus, in January-June 2010, Bulgaria exported outside the EU goods and services worth a total of BGN 5.4 B.Over 50% of the Bulgarian non-EU exports went to Turkey, Serbia, Russia, Macedonia,Singapore, and the People’s Republic of China.In the first six months of 2010, Bulgaria’s export to China grew by 219.5%, to Turkey – by 65.5%, to Serbia – by 53.6%, to Russia – by 48.9%, to Singapore – by 26.1%, to Macedonia – by 21%.Peru (+1260%) and Brazil (+345%) are other destinations to which Bulgaria’s exportregistered substantial growth.In June 2010, the Bulgarian export to non-EU countries grew by 49.1% year-on-year, reaching a total of BGN 1.1 B.The preliminary data of the NSI shows that Bulgaria’s foreign trade gap is continuing to close slowly as the country’s imports from outside the EU increased by only 7.4% in the first half o 2010 year-on-year, and amounted to BGN 7.1 B.Bulgaria’s import from Albania grew by 415%, from Israel – by 257%, from Peru – by 104%, from Macedonia – by 65%, from Serbia – by 64%.Bulgaria’s imports from Norway (-78%), South Africa (-88%), Singapore (-43%), China (-10%), Brazil (-29%) and Kazakhstan (-33%) have registered substantial decreases.In June 2010, Bulgaria’s imports from outside the EU increased by 26.5% year-on-year, reaching BGN 1.3 B.In the first half of 2010, Bulgaria’s trade balance with non-EU countries was negative BGN 1.7 B, which is substantial improvement compared with the same period of 2009 when it amounted to negative BGN 2.8 B. In June 2010, the balance was negative BGN 229.5 M.
Bulgarian industrial production up 3.6% year-on-year in June
Bulgarian industrial production marked a 3.6 per cent year-on-year increase in June 2010, the largest improvement annual increase since the beginning of the global economic crisis, National Statistics Institute (NSI) data showed on August 10. On a monthly basis, industrial production rose by a staggerring 11.6 per cent, the NSI said. The mining industry has increased by 13.4 per cent, while manufacturing was up 4.9 per cent, leading the strong recovery of the industry sector, the report said. The energy sector continued to decline on an annual basis, down by 2.4 per cent in June. Retail sales, which reflect on the domestic consumer demand, increased by 4.4 per cent month-on-month, but were 6.8 per cent down compared to June 2009. The construction sector remains the one segment of the industry still reeling from the crisis and continues to suffer, dropping by 17.5 per cent compared to the same month of 2009. Real estate construction was the main culprit, declining by 26.2 per cent on an annual basis, while infrastructure construction was down only 1.4 per cent.
Bulgaria-Greece: Pipe dreams
Despite the large number of Greek companies doing business in Bulgaria, the amount of economic co-operation between the two countries at government level has never matched the close ties of the private sector, as evidenced by the few joint projects the two countries undertook. Now, the two highest-profile ones are in danger of never materialising.Over the past three years, the planned Bourgas-Alexandroupolis oil pipeline, finally agreed in 2007 after 13 years of intermittent negotiations, has made little progress and there was no change after the first joint session of the Bulgarian and Greek cabinets in Sofia on July 27.Greece has already declared the 1.5 billion euro project to be a national priority, but if Greek prime minister George Papandreou had hoped to get any reassurances from his Bulgarian counterpart Boiko Borissov, his wish was not granted.After the meeting, Borissov again reiterated his Cabinet's intention to wait until an environmental impact assessment, expected to be finished by mid-2011 at the latest, is completed before making a final decision. In the past, he has made no secret of his expectation that the assessment would outline serious risks for Bulgaria's southern Black Sea coast and its lucrative tourism business, while the support of Bulgarian Cabinet ministers for the project was lukewarm at best.Compounding the situation is the fact that three Russian oil companies, which jointly hold 51 per cent in the pipeline project company, have yet to give firm guarantees that they will provide enough crude oil to fill the pipeline's capacity. At full capacity, the 280km pipeline would pump 700 000 barrels of oil a day, according to technical specifications.Of more immediate concern to Bulgaria, however, is the planned link between the grids of the two countries, agreed in July 2009 after the price dispute between Moscow and Kyiv left Bulgaria with no gas deliveries for two weeks during a particularly cold month of January.The connection between Stara Zagora in Bulgaria and Komotini in Greece would cost 120 million euro, of which 45 million would be provided by the European Commission. The EC aid is conditional, however, on the link-up being completed by the end of 2012.It would have an annual capacity between three and five billion cubic metres and would be equally owned by Bulgarian Energy Holding and IТGI Poseidon, a joint venture betwen Greece's Depa and Italy's Edison. Initial projections envisioned that work on the pipeline would begin by the end of 2010.Bulgarian Economy and Energy Minister Traicho Traikov said on August 2 that Bulgaria wanted to renegotiate some clauses of the deal that did not fully protect Bulgarian national interests, but he declined to provide details on the specific clauses Bulgaria wanted changed.Asked whether the negotiations on Bourgas-Alexandroupolis and the grids interconnection were related, Traikov denied any link between the two.The issue went beyond bilateral relations between Bulgaria and Greece on July 30, when US ambassador to Bulgaria James Warlick criticised Bulgaria's Government for not doing enough to see the project through, saying that the gas link would be a tangible step towards diversifying energy sources and easing the country's reliance on deliveries from Russia.
New car sales fall 38.4% y/y in Jan-Jul
The number of new vehicles sold on the local market by members of the local car importer association fell by 38.4% y/y to 10,710 in Jan-Jul. The decline narrowed from 39.4% y/y in H1 and 42.4% y/y in Jan-May. In July alone, the number of sold cars decreased by 6.6% m/m to 1,712. The passenger car segment dropped by 38.6% y/y to 10,267 units. Toyota kept the leading position with a market share of 11.2% in Jan-Jul, followed by Ford (9.9%) and Volkswagen (8.7%). The car dealers sold 443 buses and trucks in Jan-Jul, down by 32.4% y/y as compared to the 27% y/y decline in H1. Mercedes got the biggest market share with 34.1%, followed by Iveco (32.7%). The sales of motorcycles fell by 24.4% y/y to 242, almost 41% of which were Peugeot.
INVESTMENTS:
AES to invest EUR 4.3 M in Bulgarian town
U.S. energy group AES would invest 8.5 million levs ($5.8 million/4.3 million euro) in the Bulgarian town of Galabovo where it is building a 670 MW thermal power plant, Bulgarian media reported on Tuesday.The investment in infrastructure, social and cultural projects in Galabovo, in southern Bulgaria, will be made over the next five years according to a framework cooperation agreement the town has signed with AES, Dnevnik business daily reported.AES (www.aes.com) will invest immediately 1.0 million levs in the reconstruction of the main street in Galabovo. The company is building the AES Galabovo coal-fired power plant formerly known as AES - 3C Maritsa East 1, which it plans to launch by the middle of October.
COMPANIES:
Vorskla Steel Bulgaria may bid for Kremikovtzi`s assets
Vorskla Steel Bulgaria, the Bulgarian arm of Ukraine’s Vorskla Steel, may bid for the assets of defunct Bulgarian steelmaker Kremikovtzi in an upcoming auction, but it has questioned the valuation of the assets, according to local media reports. Kremikovtzi’s assets, valued at BGN 565.5 M in total, are being auctioned off on 13 September, and Viktor Demyanyuk, chief executive of Vorskla Steel Bulgaria, is quoted as saying that he already has a recovery plan for the plant and has conducted preliminary talks with the companies to which Kremikovtzi owes money. Vorskla Steel Bulgaria was created specifically to mount a takeover of Kremikovtzi back in 2008, and it signed a tolling agreement with the steelmaker in July that year, pledging to supply it with iron ore and coke and to cover certain production costs. However, the agreement was terminated a few months later due to “inconsistent and uncoordinated actions on behalf of all parties involved – the state, creditors, syndicate-unions, company management,” Vorskla said. Vorskla Steel reportedly invested some BGN 100m (Ђ51.1m) in steelmaking raw materials for Kremikovtzi in 2008, and reports suggest that Kremikovtzi still owes the company 25,000 tonnes of finished steel products. “If we are admitted to participate [in the auction], it is important for us to see [Kremikovtzi’s assets],” Demyanyuk told Bulgarian business publication Pari. “We suspect that they are only on paper and in reality are gone,” he added. Vorskla Steel in Ukraine declined to comment on the matter and Steel Business Briefing was unable to reach Vorskla Steel Bulgaria.
Chinese CBMI and Strabag to work on EUR 160 М cement plant modernization
A consortium led by Austrian Strabag has been selected to carry out modernisation works valued at a total of EUR 160mn at the site of the country's largest cement maker Devnya Cement, part of Italy's Italcementi Group, Strabag said on its website. The share of Strabag in the project will amount to EUR 90mn. Chinese CBMI, which is an expert in the construction of cement plants, is also part of the consortium and will handle plant engineering. Field works are to start in September and will continue two years. In November, Devnya Cement announced plans to launch a new clinker and cement unit with production capacity of 3mn tonnes per year in May 2012. The new installation will be designed for burning solid residuals that would potentially reduce the waste-processing expenditures of municipalities in the region. The investment in the project, which holds a first-class investment certificate, is estimated at EUR 250mn. A total of 1,000 temporary jobs will be created during the implementation of the project.