불가리아 주요 경제뉴스 (8 - 15 October 2010 )

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (8 - 15 October 2010 )

 

Sections/headline briefs:

 

MACROECONOMY:

·         EC reportedly asks for new technology for Sofia waste-processing plant project.

·         Construction of Liulin Motorway completed at 82%

·         New car sales drop 34.5% y/y in Jan-Sep

·         IMF highlights three main policy challenges for euro adoption

·         Consumer prices rise 3.5% y/y in September

·         A.T.Kearney estimates grey economy at 37.7% of GDP in H1

·         Unemployment rate falls 0.11pps m/m to 9.03% at end-September

·         Trade balance turns to surplus in August, exports surge 47.6% y/y

 

INVESTMENTS:

·         Food retailer Piccadilly to open first Tempo hypermarket in December

·         CEZ confirms plans to invest EUR 36.3mn in Bulgaria in 2011

 

COMPANIES:

• Power plant Maritsa East II completes unit upgrade.
• Holding Roads vows to build Trakia Motorway segment on time.
• NEC, AtomStroyExport extend Belene nuclear plant contract by 6 months.
• NEC expects up to EUR 250mn revenues from power exports to Turkey by end-2011.
• MobilTel seeks antitrust permission to buy Megalan Network, Spectrum Net
• Antitrust commission approves expansion of retail chain T-Market
• Local drug maker Biovet to build EUR 25mn plant in Razgrad

 

 

 

 

 

 

 

Articles:

MACROECONOMY:

EC reportedly asks for new technology for Sofia waste-processing plant project

The EC has unofficially requested the waste processing technology of the future plant in the capital of Sofia to be changed, Dnevnik daily reported, quoting unnamed high-level officials. In June, the Hut-Stanilov consortium, comprising local company Stanilov and German firm Heilit (which is part of the Strabag group) won the tender for building the plant, as it filed the cheapest offer of BGN 208.8mn (EUR 106.8mn) for the construction works and projected the lowest annual operational costs for the facility of BGN 9.4mn. EU funds are to ensure EUR 81mn of the total amount. The EC has recently asked for further explanation of how the goals of the project will be achieved, and requested more in-depth economic and financial analyses on the selected technology before allowing EU financing under the country's environment operational programme.

 

Construction of Liulin Motorway completed at 82%

The construction of the 19-km Liulin Motorway has been completed at 82%, according to information posted on the website of the council of ministers. The value of construction works has reached EUR 132mn at present and should amount to EUR 142mn by the end of the year, in order not to loose the EUR 111mn financing under the EU pre-accession programme ISPA. Liulin Motorway is to bypass the capital city of Sofia and serve as a link to the Struma Motorway which is being built to the Greek border. In 2006, Turkish company Mapa-Cengiz signed a contract to build Liulin Motorway at the price of EUR 137.4mn (75% of which was covered by ISPA) by December 31, 2010. In June, the parliament approved an additional allocation of BGN 86.1mn (EUR 44mn) to the project. A month later, the state road infrastructure agency and Mapa-Cengiz signed an annex to the contract saying that the contractor will pay compensations of EUR 14mn in case of failure to complete the construction works on the motorway within the specified deadline of May 15, 2011. In addition, the company will pay 75% of the difference between EUR 142mn and the value of the completed construction works if it cannot prove the accomplishment of construction works valued at EUR 142mn by end-December.

 

Bulgarian exports to EU up by 20.2% for the period January-July 2010

Exports to the European Union from Bulgarian companies in August  increased by 32.2 per cent, reaching 2.83 billion leva, according to the National Statistics Institute (NSI), cited by Dnevnik daily on October 11 2010. Manwhile, exports increased by 20.2 per cent in the period January-July 2010 compared to the same time period in 2009, estimated at about 10 billion leva, the report said. In October alone, the positive surplus amounts to 51.4 million leva, while for the period January -August, the index showed a continuous negative balance, amounting to 2.64 billion. The country's main trade partners for the period January-July are Italy, Germany, Greece and Romania, accounting for more than 61.7 per cent of country’s export to the EU. Exports for Italy and Germany have increased by 33.1 per cent and 22.9 per cent respectively. Bulgarian exports to Denmark and the Czech Republic also increased by 59.9 per cent and 52.3 per cent, respectively, while a decline of exports was registered with Cyprus and Portugal. In July 2010, exports to the EU soared by 33.4 per cent up to 1.9 billion leva, as opposed to the same time last year. Concurrently, imports from EU member states for January-July 2010 also rose by some 3.7 per cent as opposed to the same time last year, measuring 11.8 billion leva. The biggest growth of imports was accounted by Portugal with 98.9 per cent, while imports from Romania, Malta and Lithuania have increased by about 44 per cent. Imports in July 2010 from EU member states increased by 8.7 per cent, up to 1.8 billion leva, from July 2009, the report said.

 

New car sales drop 34.5% y/y in Jan-Sep

The number of new vehicles sold on the local market by members of the local car importer association fell by 34.5% y/y to 13,757 in Jan-Sep, local newswire Money.bg reported. The decline narrowed from 35.85% y/y in Jan-Aug. The passenger car segment dropped by 34.96% y/y to 13,189 units and the decline decelerated from 36.04% y/y in Jan-Aug. Toyota kept the leading position with a market share of 10.99% in Jan-Sep, followed by Ford (9.57%) and Volkswagen (8.89%). The car dealers sold 568 buses and trucks in Jan-Sep, down by 28.6% y/y. The sales of motorcycles fell by 22% y/y to 292, 41% of which were Peugeot. The sales are expected to reach some 18,500 vehicles this year, down from 26,813 ones in 2009, Monitor Daily quoted the head of the association Stefan Hadzhinikolov.

 

IMF highlights three main policy challenges for euro adoption

The IMF outlined the three main challenges before the government in achieving its long-standing policy objective of ERM II membership and eventual euro adoption in the concluding statement of its last mission in the country posted on the website of the institution on Friday (Oct 8). The challenges are as follows: (1) the cabinet should pursue a credible medium-term fiscal consolidation, underpinned by bold structural reforms, more efficient utilization of government resources, and gradual rebuilding of the fiscal buffer; (2) the banking system should remain strong and well capitalized to preserve the financial stability and back up the recovery through new lending and (3) the government must improve the business and regulatory environment and introduce reforms to raise labour productivity to enhance more sustainable growth driven by the tradable sector. Though the IMF experts recommended strict spending control to reach the 2010 budget deficit target in view of the revenues underperformance, they also underlined that ,,efforts should focus on scaling-back new obligations and not come at the expense of timely payment of existing obligations". Meeting the 2011 target and diversifying financing sources would help anchor expectations and raise the fiscal reserve. The IMF welcomed the expenditure adjustment, but warned that authorities should be ready to implement contingency measures if needed, having in mind the uncertainty of the recovery. Such a step would help enhance budget credibility and policy predictability. on the expenditure side, short-term reforms in the social security system, and identifying efficiencies in health, education, wage, and subsidy spending could be considered while the government may try to broaden the tax base and raise VAT or social security contributions rates on the revenues side. The IMF highlights that bolder and more permanent reforms, crucially in the area of pensions and health, are needed to sustain the adjustment momentum and to improve the efficiency. The IMF praised the intention of the cabinet to impose ceilings on the ministries' liabilities as part of the institutional reform needed to buttress the adjustment process. The institution projected that the real GDP will grow between 0 and 0.4% this year as the country has benefited from the upswing in its main trading partners and the expansion will accelerate to 2-2.5% in 2011 on domestic demand recovery. The banking system has remained stable with buffers adequate even after the new Basel III requirements. The IMF underlined that maintaining the currency board has been crucial for the stability seen during the crisis and strong policies have kept this year's budget on track despite weak revenues.

 

Industrial production rises 5.1% y/y in August

The industrial production index increased by real 5.1% y/y in August, accelerating from revised 0.9% y/y in July, preliminary data of the statistical institute showed. In seasonally-adjusted terms, the industrial production added 1.1% m/m after a decline of 0.4% m/m in July. The statistical office has started providing also working-day-adjusted data, which shows that the industrial production index rose by 3.7% on an annual base. The growth rate of the manufacturing sped to 6.8% y/y in August from revised 2.7% y/y in July while the extracting industry and the utilities sector turned to growth in annual terms. only the production of non-durable consumer goods remained on negative territory due to the lower manufacturing of tobacco products and beverages. A total 17 of the 27 branches posted growth rates in August as compared to 16 in July. The industrial turnover index increased by 25.7% y/y, indicating a further reduction in inventories. Exports surged by 41.7% y/y and domestic turnover went up by 17.7% y/y indicating recovery of domestic demand. 

Industrial performance
Real changes,(% y/y)	July 2010, (preliminary)	July 2010, (final)	August 2010, (preliminary)
Industrial output	-0.6	0.9	5.1
Extracting industry	-0.4	-0.1	2.8
Manufacturing	1.1	2.7	6.8
Utilities	-5.6	-3.4	1.9
Industrial turnover*	15.1	16.2	25.7
Source: National Statistical Institute, *nominal data for industrial turnover

 

 

Consumer prices rise 3.5% y/y in September

Consumer prices increased by 3.5% y/y in September, speeding from 2.7% y/y in the previous month, statistical office data showed. on a monthly basis, prices went up by 0.8% and the inflation accumulated since the beginning of the year reached 2.7%. The annual increase in food prices accelerated in September, after turning to growth in August. Food prices have been declining in the past several months. The non-food inflation also accelerated as compared to a month earlier, indicating the recovery of private consumption. The EU harmonised inflation index (HICP), used as a benchmark for the euro adoption, went up by 3.6% y/y in September, accelerating from 3.2% y/y in August. In monthly terms, it rose by 0.2%. We expect consumer prices to continue rising at a slow rate by the end of the year in line with expectations for domestic demand recovery. The rising world wheat prices as a result of the weak harvest in Russia after the fires are also likely to affect the domestic ones through potentially higher exports. 

Price Dynamics, Change, %
	Aug 2010, y/y	Sep 2010, y/y	Sep 2010, m/m	Weights CPI, 2010
CPI	2.7	3.5	0.8	100.0
Food	0.1	2.0	2.3	36.8
Non-food	6.1	6.8	0.5	31.1
Services	2.0	1.8	-0.9	26.6
Catering	2.8	2.4	0.2	5.5
HICP	3.2	3.6	0.2	100.0
Source: National Statistical Institute

A.T.Kearney estimates grey economy at 37.7% of GDP in H1

Consultancy company A.T.Kearney estimated that the share of the grey economy in Bulgaria amounted to 37.7% of GDP in H1, state newswire BTA reported. The survey, commissioned by Visa Europe, was presented at a forum on electronic payments as a measure against the grey economy. The main conclusions of the forum pointed that raising the number of electronic payments by 10% would reduce the share of the grey economy by 5%. As already reported, the national statistical office presented an estimate of the grey economy, which showed that its share has been gradually falling since 2003 to only 10.4% of GDP in 2008. The survey is based on official financial indicators and indicates that the largest share of grey economy is to be found in agriculture (16.6%), the service sector (12.8%) and the industry (11%). At the same time, the employers assessed the share of the grey economy in Bulgaria at 42.2%, while employees claimed it was 58%, according to a survey of 1,000 employers and employees.

 

Construction output drops 10.7% y/y in August

The unemployment rate, measured by registrations with the state labour agency, declined by 0.11pps m/m to 9.03% at the end of September, the institution said on its website. The monthly decrease sustained for a seventh month in a row but was mostly driven by seasonal factors. The annual growth rate further narrowed to 1pps y/y in September from 1.4pps y/y a month earlier and more than 3pps y/y at the beginning of the year. The start of the new school year was the reason for the higher number of opened job positions in the education, the reduction of the unemployed with higher education and the increase in the contribution of the public sector to the total job openings during the month. The unemployment rate remained above the average in 17 out of the 28 regions in the country. We note that a steady recovery of the labour market is to follow only after an improvement in domestic demand and the services sector, which is still to be seen in the future months. However, the labour ministry expects that seasonal factors are to result in an increase in the number of unemployed by no more than 5-6,000 workers as most of the employed will switch jobs from the summer to the winter tourism resorts. Last month, labour minister Totyu Mladenov projected that the unemployment rate will not exceed 10% by the end of the year.

 

Unemployment rate falls 0.11pps m/m to 9.03% at end-September

The unemployment rate, measured by registrations with the state labour agency, declined by 0.11pps m/m to 9.03% at the end of September, the institution said on its website. The monthly decrease sustained for a seventh month in a row but was mostly driven by seasonal factors. The annual growth rate further narrowed to 1pps y/y in September from 1.4pps y/y a month earlier and more than 3pps y/y at the beginning of the year. The start of the new school year was the reason for the higher number of opened job positions in the education, the reduction of the unemployed with higher education and the increase in the contribution of the public sector to the total job openings during the month. The unemployment rate remained above the average in 17 out of the 28 regions in the country. We note that a steady recovery of the labour market is to follow only after an improvement in domestic demand and the services sector, which is still to be seen in the future months. However, the labour ministry expects that seasonal factors are to result in an increase in the number of unemployed by no more than 5-6,000 workers as most of the employed will switch jobs from the summer to the winter tourism resorts. Last month, labour minister Totyu Mladenov projected that the unemployment rate will not exceed 10% by the end of the year.

 

Trade balance turns to surplus in August, exports surge 47.6% y/y

Exports increased by 47.6% y/y to BGN 2.83bn (EUR 1.45bn) in August and by 32.2% y/y to BGN 19.2bn in Jan-Aug, preliminary data of the statistical institute showed. The indicator rose for a tenth month in a row, accelerating from 46.2% y/y in July, showing steady improvement in the foreign demand for locally-produced goods. The expansion of sales to EU and non-EU countries had almost equal rates of increase in August while non-EU demand was the main driver of sales abroad in the previous months. Imports (fob) grew by 14.8% y/y to BGN 2.78bn in August and by 7.2% y/y to BGN 21.8bn in Jan-Aug. The foreign trade balance turned positive in August and the gap contracted by 54.9% y/y since the beginning of the year. It reached BGN 2.64bn in Jan-Aug and accounted for 3.7% of the full-year GDP forecast as compared to 8.5% of GDP in Jan-Aug last year.

 

 

INVESTMENTS:

Food retailer Piccadilly to open first Tempo hypermarket in December

Retail chain Piccadilly, fully controlled by Serbian company Delta Maxi, will open its first hypermarket under the Tempo trade mark on Dec 2, local newswire Investor.bg reported. The facility will be located on a 10,000 sqm trade area in the capital city of Sofia and the investment is estimated at above BGN 16mn (EUR 8.2mn). The Tempo stores combine cash and carry and discounter formats. The company plans to open Tempo stores in all Bulgarian towns with a population of more than 100,000. It will open 5 stores and has earmarked to invest BGN 100mn in the development of the chain until 2013.

 

CEZ confirms plans to invest EUR 36.3mn in Bulgaria in 2011

The local subsidiary of Czech major energy company CEZ confirmed its plans to invest BGN 71mn (EUR 36.3mn) next year as stated in its regulatory programme, local Dnevnik daily reported. However, the company warned that the capital expenditures in infrastructure may be reduced if the electricity price remains unchanged as of July 1, 2011. Parent company CEZ intends to cut its infrastructure expenditures as of next year, as its revenues have fallen as a result of the lower power consumption, Reuters reported. CEZ Bulgaria also stated that its clients have accumulated liabilities in the amount of BGN 75mn from unpaid bills. CEZ owns 67% of the distribution grids in western Bulgaria, servicing more than 1.9mn customers. The company also owns a coal-fired power producer in the northern Black Sea city of Varna, the second-largest thermal power plant in Bulgaria and on the Balkan Peninsula, with a total installed power of 1,260 MW

 

 

COMPANIES:

Power plant Maritsa East II completes unit upgrade

Coal-fired power plant Maritsa East II, part of state-owned Bulgarian Energy Holding (BEH), is to put back into operation one of its units after repairs, today (Oct 12), newswire Focus reported. The upgrade raised the unit's capacity to 230 MW from 210 MW and extended its operational life by 25 years. The investment is estimated at BGN 68.7mn (EUR 35.1mn). Also, the plant will put into exploitation the newly-built fiberglass chimneys of units 7 and 8, which will raise the efficiency of its sulphur-purification installations to 94% from 92% and will reduce limestone costs by more than 2%. The investment exceeds BGN 27mn. Maritsa East II runs 8 power generators with a combined production capacity of 1,556MW at present. It produced 18% of the country's electricity in 2008 and is the largest thermo-power plant on the Balkans. 

 

Holding Roads vows to build Trakia Motorway segment on time

Construction works on the 49-km section between Yambol and Karnobat of the Trakia Motorway in southern Bulgaria will be completed on time and with the necessary quality, Bulgaria's largest road construction entity Holding Roads said in a statement on its website. Holding Roads claims that the filing for insolvency of one of its partners in the project, Moststroy, will not hamper the implementation of the project. The Trakia IV tie-up, comprising local companies Holding Roads, Galchev Engineering, Moststroy and several smaller firms, started construction works on the project on Sep 3. Trakia IV filed the cheapest bid of BGN 174.7mn (EUR 89.3mn), VAT excluded. Construction works should be completed in 28 months. Trakia Motorway connects the capital city Sofia to the southern Black Sea city of Burgas. The last three segments between Stara Zagora and Karnobat with a combined length of 115 km are being built.

 

NEC, AtomStroyExport extend Belene nuclear plant contract by 6 months

State national grid operator NEC and Russian AtomStroyExport signed an annex to the EUR 4bn preliminary contract for the construction and launching of the two 1,000 MW units of a nuclear plant in the Danube town of Belene by 6 months until March 31, 2011, the Bulgarian Energy Holding (BEH), parent of NEC, told local Dnevnik Daily. The preliminary contract expired on September 30 this year. No other details of the annex have been made available. A few months ago, AtomStroyExport requested an increase of between EUR 2.5bn and EUR 3.5bn, in the price of the project. In September 2009, field works on the nuclear plant were frozen after Germany's RWE withdrew from the project. BEH is expected to select in near terms a consultant, which should prepare a concept for the development of the project, update its economic aspect, and prepare an investor selection procedure and a financial model update.

 

NEC expects up to EUR 250mn revenues from power exports to Turkey by end-2011

The state power grid operator, the National Electricity Company (NEC), expects revenues from electricity exports to Turkey to total between EUR 200mn and EUR 250mn in the period from November this year to the end of 2011, CEO Krasimir Parvanov told local newswire Mediapool.bg. NEC has already called two tenders for power exports of 80 MW both in November and December and two lots of 250 MW for the whole 2011. All companies interested to sell electricity to Turkey should present their proposals by Oct 18, but the deadline might be extended. Parvanov also said that NEC turned to a BGN 130mn (EUR 66.5mn) pre-tax profit in Jan-Sep as compared to a loss of some BGN 40mn a year before. Earlier in the month, Bulgarian economy and energy minister Traycho Traykov and Turkish energy and natural resources minister Taner Yildiz agreed that Bulgarian electricity exports to Turkey may restart as of Oct 24, when the synchronisation of the Turkish grids to the European ones will be completed. Turkey stopped importing electricity from Bulgaria in April 2003, which has been contracted under the agreement for allowing Turkish investors to Bulgarian infrastructure projects. The Turkish electricity company interrupted electricity imports from Bulgaria, claiming the country had not fulfilled its investment project commitments.

 

MobilTel seeks antitrust permission to buy Megalan Network, Spectrum Net

Bulgaria's leading wireless telecommunication services provider MobilTel (M-tel) asked the state antitrust commission to allow it to buy the two local cable operators Megalan Network and Spectrum Net, the regulator said on its website. The antitrust body expects the concentration to affect the provision of landline telephone services, paid TV, and fixed broadband Internet on the territory of the country. All interested parties are invited to send opinions in a week. We remind that last month, the parent of MobilTel, Telekom Austria, announced plans to buy Megalan Network and Spectrum Net for EUR 72mn, including a final payment of EUR 14.5mn in 2011, depending on the performance of the companies. Megalan Network is the biggest Internet provider in the capital city of Sofia (50% territory coverage and 57,500 clients) and owns both cable and optical networks. It also offers digital TV services. Spectrum Net is an Internet-based telecommunications company, claiming to be the largest alternative telecommunications operator in the country after the acquisition of alternative landline and Internet company Orbitel several months ago. It offers its services to 31,600 clients mainly in the business segment. Its MPSL network covers the whole territory of the country and provides access to 90% of the population.

 

Antitrust commission approves expansion of retail chain T-Market

The state antitrust commission allowed the local unit of Lithuanian retail chain Maxima Group, trading as T-Market, to run supermarkets of another retailer, Kaleya, under a long-term leasing agreement, the regulator said on its website. The watchdog stated that the concentration will affect the fast moving consumer goods (FMCG) market in the capital city of Sofia, but would not affect negatively competition. Maxima Group operates 30 supermarkets in 11 towns across the country and employs 985 people. More than half of its stores are located in Sofia. Earlier in the year, the retailer announced intentions to bring the number of its stores to 50 in a year. According to company estimates, it will claim a 2% share of the retail market in Bulgaria, ranking as the sixth-largest retailer, if the antitrust commission approves the acquisition of 7 of the 11 Kaleya Market stores. In July, Maxima Group asked the regulator to allow it to buy stakes in three local traders: Kaleya Market, Foods Commerce and Darya. The financial aspect of the concentration has not been disclosed.

 

Local drug maker Biovet to build EUR 25mn plant in Razgrad

Bulgaria's third-largest pharmaceutical producer Biovet plans to build a plant for biotechnologies and pharmaceutical products in the north-eastern city of Razgrad on the site of one of its plants, local newswire Investor.bg reported. The investment is estimated at EUR 25mn and will double the capacity of the factory. Own funds and bank credits will provide the financing, CEO Kiril Domuschiev told Dnevnik daily. Construction works are to start tomorrow (Oct 16) and should be completed in a year. The plant is expected to create 220 new jobs. Biovet is specialised in the production of veterinary medicines and most of its sales are directed to exports. It runs production facilities also in Peshtera and Botevgrad.

 

 

 

 

Reported by:

Georgi Iliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea