불가리아 주요 경제뉴스 (5 - 12 November 2010 )

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (5 - 12 November 2010 )

 

Sections/headline briefs:

 

 

 

MACROECONOMY:

·         State budget 2011 adopted at first reading

·         Exports surge by 37.1% y/y in September

·         Industrial production up 7.1% y/y in September

·         Average wage up by 9.4% y/y in Q3

·         Employment down by 1.3% q/q in Q3

·         Retail sales down 0.5% m/m in September

·         Unemployment rate down to 8.9% in October

·         Construction output down by 13% y/y in September

·         Industry Watch: Bulgaria's Debt Up to 5.2% of GDP

·         Bulgaria Boosts Export to Non-EU Countries

 

 

INVESTMENTS:

• Bulgaria Negotiates EUR 126.6 Mln in Funding from Norway, Iceland, Liechtenstein
• Bulgaria's Outsourcing Market Number 1 in Europe
• Serbia interested in Belene nuke project, Croatia rules out participation

 

 

COMPANIES:

• Bulgaria's Sofiyska Voda Sale to French Veolia Wrapped Up

·         Kozloduy nuclear plant gearing up for lifetime extension – report

·         Bulgaria, Gazprom call feasibility study tender for South Stream section

• Bulgaria permits South Stream JV establishment
• Sofia Airport passengers up by 13.6% y/y in Oct
• Tender for key railway section upgrade attracts 12 Bids
• Japan's Wind Energy 2007 to build 100 MW wind park near Sliven
• Drug company Huvepharma plans acquisitions of competitors

 

 

 

 

 

Articles:

MACROECONOMY:

State budget 2011 adopted at first reading

The parliament adopted today at first reading the 2011 State Budget. The draft to the budget, which was called by Finance minister Simeon Djankov 'a budget of stability', was supported by CEDB and the parliament group of Ataka. The right wing Blue coalition abstained from voting while the left wing Coalition for Bulgaria voted against. Key targets of the budget bill are a stable currency board, low taxes, growth-oriented public spending, completion of the pension, health and administrative reform, preserving the current level of pensions and wages, Finance Minister Djankov said. He added that achieving an improvement in EU funds absorption remains a strategic priority. Public borrowing at the local government securities market at lowest cost and optimal risk exposure will be the main instrument for achieving fiscal stability and management of the government debt. The macro frame is based on a projection for 3.6% real GDP growth in 2011, engined by exports and a gradual recovery of domestic demand. The harmonized inflation (average) is forecast to be 3.7% next year, as compared to expected 3.2% in 2010. Budget revenues are set 5.3% y/y higher, expected to amount to 33.5% of GDP. Expenditures target to decline to 35.5% of GDP, as compared to 37.7% in 2010.The target budget deficit in 2011 is BGN 1.963mn or 2.5% of GDP. The budget does not envisage raising of direct taxes, pensions or the minimum wage. Social insurance contributions will however increase by 1.8%, as previously decided. Pensions expenditure is projected at 9.6% of GDP (compared to 11.6% in 2010), 3.5% of GDP will be allocated to defence and security, 3.3% to education, 3.9% to health-care and 12.6% to social insurance, assistance and care. 

Main macro and fiscal frame	2010 (expected)	2011 (forecast)
GDP (BGN, mn)	71,726	77,076
Real growth of GDP	0.7%	3.6%
Harmonized inflation (average)	3.2%	3.7%
Current account (as % of GDP)	-3.3%	-3.5%
FDI (as % of GDP)	4.1%	5.0%
Budget revenues (BGN, mn)	24,548	25,844
as per of GDP	34.3	33.5
Budget expenditures (BGN, mn)	27,03	27,807
as per of GDP	37.7	35.5
Budget defcit (BGN, mn)	3,262	1,963
as per of GDP	4.6	2.5
Source: Report to the Draft of a 2011 State Budget of republic of Bulgaria Act

 

Exports surge by 37.1% y/y in September

Exports increased by 37.1% y/y to BGN 2.8bn (EUR 1.43bn) in September and by 32.9% y/y to BGN 21.9bn in Jan-Sep, preliminary data of the statistical institute showed. The indicator rose for an eleventh month in a row, but decelerated by some ten percentage points as compared to August when the annual rate of growth was 48%. The expansion of sales to non-EU countries far outpaced exports to EU countries in September (rates of increase were 67% to non-EU as opposed to 22.4% to EU) while in August, the growth rates were almost equal. Imports (fob) rose by 14.3% y/y to BGN 2.96bn (EIR 1.51bn) in September and by 8.1% y/y to BGN 24.8bn in Jan-Sep. The foreign trade balance in Sep submerged in negative territory again, after registering a surplus in the previous month. The gap reached BGN 2.8bn in Jan-Sep and accounted for 4% of the full-year GDP forecast.

 

Industrial production up 7.1% y/y in September

The industrial production index increased by 7.1% y/y in September, accelerating from 5.1% y/y in August, preliminary data of the statistical institute showed. The index added 1.6% m/m in seasonally-adjusted terms, down from revised 2% m/m in August. The working day-adjusted data shows that the industrial production index rose by 9.3% on an annual basis, accelerating from 4% y/y a month earlier. The growth rate of the mining industry sped to 3.1% m/m, reversing a 1.4 monthly decline in August. The production in the manufacturing sector also improved to 2.8 m/m, the utilities sector fell by 4.1% m/m. 

 

Average wage up by 9.4% y/y in Q3

The average monthly wage increased by 9.4% y/y to BGN 638 (EUR 326.2) in Q3, accelerating from 8.8% y/y in Q2, the statistics office reported. The growth of the public sector wages sped up to 4.7% y/y, reaching BGN 731 in Q3 from 3.7% in Q2. However, the private sector wages were still rising at a much faster rate of 11.8% y/y to BGN 605, mildly speeding up from 11% y/y in Q2. The public and private sector wages stood flat on the quarter in Q3. The public sector wages were higher by 20.8% y/y than the private sector ones in Q3, same as in Q2, partially due to underreporting in small firms. The average wage inched down by 0.4% on quarterly basis in Q3 against 3.4% q/q in Q2. Wages went up the fastest in agriculture, forestry and fisheries (7.8% q/q) and transportation, storage and communications (4.2% q/q). In annual comparison, wages grew the most in IT and telecommunications (34.8% y/y) and professional activities and research (18.8% y/y). 

 

Employment down by 1.3% q/q in Q3

The number of employed individuals decreased by 30,000 or by 1.3% q/q to 2.2mn as at end-September, the statistics office reported. The biggest decrease in employment was observed in hotels and restaurants (down by 15% q/q) and culture, sports and entertainment (down by 10% q/q). on the other hand, the highest increase in the number of newly hired was witnessed in the processing industry - up by 0.8% q/q. In terms of structure, the processing industry accounted for the biggest share of employees with 23.4%, followed by trade and repair with 18.3% (down by 0.6% q/q). on an annual basis, the number of newly hired narrowed by 6% y/y or 140,000 in September. In terms of total number of employees, the decline was driven mostly by the significant drop in employment on the year in the fields of construction (down by 32,000), trade and repairs (down by 30,000) and processing industry (down by 29,000). The largest percentage decrease was recorded in construction (down by 18% y/y), and hotels and restaurants (down by 12.2% y/y).

 

Retail sales down 0.5% m/m in September

Retail sales (excluding motor vehicles and motorcycles) decreased by 0.5% m/m in September, preliminary data of the statistical institute showed. The drop decelerated from 0.8% m/m in August. A small increase was registered in retail sale of food, beverages and tobacco (0.3% m/m) and in sale of textiles, clothing, footwear and leather goods in specialised stores (0.5% m/m). The rest categories reported declines as compared to the previous month. In working day-adjusted terms, the retail sales turnover shrank by 4.7% y/y, adding 4 pps to the decline registered in August (4.3% y/y). The sale of food, beverages and tobacco in non-specialised stores was the only activity that marked an annual growth in Sep (0.2%). The highest y/y drops were reported in sale of computers, software and telecommunication equipment (down 9.4% y/y), as well as in sales via Internet ( down 11.7% y/y) and sale of medical and cosmetic goods (down 9.8% y/y).

 

Unemployment rate down to 8.9% in October

The unemployment rate, measured by registrations with the state labour agency, declined by 0.11pps m/m to 8.92% at the end of October, the institution said on its website. The monthly decrease sustained for an eighth month in a row. It was mainly due to a good implementation of the National Employment Plan, two packages of anti-crisis measures and the Operational Programme Human Resources Development, as stated by labour minister Totyu Mladenov in a press conference yesterday. The improvement was also a result of the creation of new jobs in the real sector and the sharp decline in massive lay-offs, the minister added. The unemployment rate further narrowed by 0.7 1pps as compared to the same month previous year, from 1pps y/y a month earlier and more than 3pps y/y at the beginning of the year. The growth in the number of unemployment remained above the average in 17 out of the 28 regions in the country. Mladenov forecasts that the average unemployment rate in 2010 will be around 9.5%, some 2pps lower than previously projected (11.4%). He also added that raising the minimum wage is one of the government's priorities. Earlier this month Mladenov said that the minimum monthly wage could be indexed up as of July 1, 2011 but the decision was still a subject of negotiations.

 

Construction output down by 13% y/y in September

The construction output continued to decline with its decrease accelerating to 13% y/y in September from 10.7% y/y in August, data from the statistics office showed. The construction of buildings dropped by 20.7% y/y (18.5% y/y contraction in August) and the volume of the civil engineering works - by 1.3% y/y (after an increase by 3.7% y/y in August). In seasonally adjusted terms, the total construction output dropped by 1.1% m/m in September (against 1.6% m/m increase in August) on 2.6% decrease in buildings and 1.3% in civil engineering.

Industry Watch: Bulgaria's Debt Up to 5.2% of GDP

Bulgaria's state debt has risen by almost 3 percentage points and reached 5.2% of GDP, according to Industry Watch. As of September, net state debt was risen with some BGN 1.5 B for the year, and has reached BGN 3.5 B. For last year, net debt was 2.3% of GDP, which marks a significant up in government deficit. According to Industry Watch information, the Bulgarian state has a total of BGN 10.2 B of debt. The fiscal reserve was upped BGN 0.5 B August-Sepbember, and has now reached BGN 6.7 B, which is still BGN 1 B less than a year ago. Industry Watch also reports inflation rates at the producer considerably higher for some sectors than the 3.5% reported at the consumer for September.

 

Bulgaria Boosts Export to Non-EU Countries

Bulgaria's export to non EU states has shown a substantial growth of 50% up to BGN 8.6 B in the first eight months of 2010, according to the National Statistical Institute. The main trade partners of Bulgariawere Turkey, Serbia, Russia, the Former Yugoslav Republic of Macedonia, Singapore, China,and the USA that formed over 54% of the total export to non EU countries. The exports to China increased by 256.4% and those to Turkey by 65.2%. The exports to Serbia and Russia reported growth by 72% and 53.9% respectively, to Singapore by 16% and to The former Yugoslav Republic of Macedonia by 33.1%. The exports to Peru, South Korea, Syria, Brazil, India and Vietnam increased significantly. Fall was reported in the exports to United Arab Emirates, Bosnia, Indonesia, Albania and Norway. In September 2010 the export to third countries increased by 67.1% compared to the corresponding month of the previous year and was over BGN 1 B. Bulgarian import from third countries in the first nine months of 2010 has increased by 11.6% compared to the corresponding period of the previous year and reached BGN 11 B. The growth has been most notable in the import from Israel, Egypt, Albania and Peru. The import from Serbia increased by 48.1% and from Republic of Macedonia by 43.2%. The largest fall was observed in the imports from Kazakhstan, South Africa and Norway. The figures show that Bulgaria's trade balance with non EU states is negative for the first nine months of 2010.

 

 

INVESTMENTS:

 

Bulgaria Negotiates EUR 126.6 Mln in Funding from Norway, Iceland, Liechtenstein

Sofia/Oslo, November 5 (BTA) - Bulgaria and Norway started their first round of negotiations under the European Economic Area (EEA) Financial Mechanism and the Norwegian Financial Mechanism for 2009-2014, the Bulgarian Government Information Service said on Friday. The Bulgarian delegation to the talks in Oslo is led by EU Funds Minister Tomislav Donchev, and the Norwegian delegation is headed by Foreign Ministry Deputy Director General Steinar Hagen. "I want to thank Norway and, of course, Iceland and Liechtenstein for the financial support for Bulgaria. The 126.6 million euro in funding you have provided, including 78.6 million euro under the EEA Financial Mechanism and 40 million euro under the Norwegian Financial Mechanism, will contribute to the economic and social development of my country," Donchev said, opening the negotiations. He noted that the implementation of the two programmes between 2004 and 2009 was a positive experience and these programmes are highly assessed by the organizations working on them. The rules for implementing the projects are more flexible than those for similar programmes financed by the EU, Donchev said. He went on to say that the projects for the current period are already at an advanced stage and there are tangible results in the fields of environmental protection, human resources development, health and child care, and European heritage protection. During the current first round of the negotiations, the sides reached a tentative agreement that under the EEA Financial Mechanism 2009-2014 Bulgaria will work on six priorities: environmental protection and management, climate change and renewable energy sources, civil society, human and social development, cultural heritage protection, and academic research. Under the Norwegian Financial Mechanism 2009-2014, Bulgaria will work in the priority fields of innovation for environment-friendly activities, promoting decent working conditions and tripartite dialogue, and human and social development. The Bulgarian side proposed the inclusion of two previously defined projects: "Sofia Arsenal - Museum of Contemporary Art" (under the EEA Financial Mechanism) and "Earth Surveillance and Global Monitoring of the Environment and Security" (under the Norwegian Cooperation Programme). The second round of the talks will be held in Sofia early in 2011. A memorandum of understanding with the donor countries will be signed by the end of March 2011. 

 

Bulgaria's Outsourcing Market Number 1 in Europe

The outsourcing market in Bulgaria is currently estimated at EUR 100 M to EUR 150 M a year, but has the potential to go up over 10 times, according to Economy and Energy Minister, Traicho Traikov. Traikov spoke Thursday during a conference titled "Bulgaria on the World Outsourcing and Offshore Map," at the Sheraton hotel in downtown Sofia. The event was organized by the American Chamber of Commerce in Bulgaria, the Bulgarian Investment Agency and Colliers International, gathering over 300 politicians, experts, local and international businessmen. "Outsourcing is literally export of production; the concept of taking internal functions of a company and giving them for execution to an external company.Offshore is the moving of production and services to countries with lower labor cost and/or better investment and tax climate, Traikov explained. The Minister announced Bulgaria ranks 1st in Europe and 13th in the world by outsourcing, citing a March research of the international research agency "ATKearney." Traikov pointed out as main factors the country's location, qualified work force, quality education and low taxes, adding encouraging the outsourcing market is key for attracting foreign investors. The Minister gave as example his own institution studying opportunities to give the activities related to the management of the "Competitiveness" operational program to an outside business. "Every time I notice someone not doing their work, I tell them we will pay someone else to do it, and it is always effective," Traikov joked.

Serbia interested in Belene nuke project, Croatia rules out participation

Serbia is interested in participating as a shareholder in Bulgaria's Belene nuclear plant, while Croatia ruled out such a participation, Darik radio reported. Bulgarian Prime Minister Boiko Borisov invited the two countries to become minority shareholders in the plant, offering them stakes of 1% to 2%. ,,Serbia is interested in the project", Serbian Minister of Economy Petar Skundric said, adding that the country might also seek to increase the share of participation to 5%. Croatian Prime Minister Jadranka Kosor, on the other side, said her country will not take part in the project. Kosor and Borisov attended the Danube Summit in Bucharest on Monday. Serbia and Croatia were expected to decide on their participation in the project by November 13, when Russian PM Vladimir Putin will visit Bulgaria for high-profile energy talks. In 2008, Bulgaria signed a contract with Russian Atomstroyexport to build the Belene nuclear plant on the Danube River for some EUR 4bn, but the price is expected to rise with the inflation index.

 

 

COMPANIES:

Bulgaria's Sofiyska Voda Sale to French Veolia Wrapped Up

The deal for the sale of several European water supply and treatment businesses from United Utilities, including Bulgaria's Sofijska Voda, to France's VeoliaEnvironnement, has been finalized. Veolia, the world's biggest listed water company, unveiled the deal, with an enterprise value of about EUR 199 M in June. United Utilities sale of non-regulated businesses included subsidiary United Utilities Australia and investments in the UK, the Philippines, Bulgaria and Poland. The French utility will take a 77.1% stake in Sofiyska Voda, the company operating water supply and treatment services for the city of Sofia in Bulgaria, which serves 1.3 million inhabitants. The acquired stake includes the share of the European Bank for Reconstruction and Development. The company plans to invest BGN 240 M by 2013, BGN 50 M of which come from a loan from the European Bank for Reconstruction and Development. The concessioner invested last year BGN 52 M in an upgrade of no more than 1% of the sewage system. More than twenty years after the fall of the communist regime, Bulgaria's water sector remains one of the least reformed systems in the country. Except for Sofia municipal water supply, which has been granted on concession to a foreign investor, all other units in the sector are either owned by the state or the municipalities. The company in Sofia however has been harshly criticized for shortage of investments in the upgrade and maintenance of the system. An average 60% of water pumped in the pipes never reaches Sofia consumers, while in some regions losses account for up to 90 %.

Kozloduy nuclear plant gearing up for lifetime extension - report

Bulgaria's Kozloduy nuclear power plant has started the process of extending the lifetime of its fifth and sixth reactors, the plant's new head Kostadin Dimitrov told Bulgarian National Radio. The country's sole nuclear plant will first call a tender to select a company that will carry out a study on the units' capacities, he said. The operation permit of one of the units expires in 2017 and the plant should take all the necessary measures to extend its lifespan by at least 20 years, Dimitrov said.
Meanwhile, the plant has begun talks with Russian producer TVEL to reduce the price of fresh nuclear fuel and was currently awaiting the approval of its parent company, the Bulgarian Energy Holding, to proceed with signing a contract annex to ensure next year's supplies, he said. Kozloduy will seek regulatory approval to sell a larger share of its power production on the free market, Dimitrov said in his first media appearance since being promoted to executive director earlier in the month. The power station sells about a third of its output on the free tmarket, while the remainder is sold on the regulated market. Meanwhile, Bulgaria's president Georgi Purvanov suggested on November 9, during a meeting with Syrian counterpart Bashar al-Assad, that the Middle Eastern state could buy electricity from the country's second nuclear power plant, Belene. The construction of the Belene plant could break ground for Bulgaria's exports of electricity, including to Syria, where there was a shortage of supplies, Purvanov said. Syria borders Turkey, which considers building four nuclear plants, In order to ensure a market for the electricity produced by Belene, Bulgaria's Prime Minister Boiko Borissov offered Serbia and Croatia to join project.

 

Bulgaria, Gazprom call feasibility study tender for South Stream section

The Bulgarian Energy Holding (BEH) and Russian gas company Gazprom called a tender for the preparation of the feasibility study of the Bulgarian section of the South Stream pipeline for natural gas transit. The tender announcement on BEH's website sets November 9 as deadline for companies to express their interest in the project. The shortlisted candidates, meeting criteria like minimum profit and experience in the field, will be given access to the tender papers on November 11. The feasibility study will cover the technical, legal, territorial, economic and social aspects of the pipeline construction. The South Stream is a joint project of Italy's Eni and Gazprom, envisaging transportation of Russian natural gas through the Black Sea to Bulgaria and further to Italy and southeastern and central Europe. It is due to be completed in 2015 and is estimated to cost EUR 25bn, much above the initially planned EUR 10bn. Gas supplies in the amount of 63bn cubic metres per year under the project are to start from the Beregovaya compressor station in Russia and reach Bulgaria through the Black Sea. South Stream is criticised for duplicating Nabucco, being expensive and reinforcing Bulgaria's energy dependency on Russia. The 3,300-km Nabucco pipeline for transport of natural gas from Central Asia and Middle East to Europe will have a transit capacity of 31bn cubic metres of natural gas per year (to be reached in 2018, with an option for an increase to 65bn cubic metres) and is expected to meet 5-10% of the European demand. The latest investment estimates for Nabucco, made in 2008, pointed to total costs of EUR 7.9bn. First supplies should be expected at the end of 2014.

 

Bulgaria permits South Stream JV establishment

Bulgaria's government allowed the establishment of a joint stock company that will manage the Bulgarian stretch of the South Stream natural gas pipeline, economy minister Traicho Traikov said according to BTA news agency. The company will be set up by the Bulgarian Energy Holding and Russia's Gazprom with equal participation. The company will have to assign the design and the environmental impact assessment (EIA) among others before the investment proposal is being made. Afterwards, the joint venture will build, own and operate the gas pipeline. The decision for the JV establishment is expected to be signed during the forthcoming visit of Russian President Vladimir Putin on November 13. The establishment of the entity was envisaged in the project roadmap, signed on July 17, 2010. The South Stream is a joint project of Italy's Eni and Gazprom, envisaging transportation of Russian natural gas through the Black Sea to Bulgaria and further to Italy and southeastern and central Europe. It is due to be completed in 2015 and is estimated to cost EUR 25bn, much above the initially planned EUR 10bn. Gas supplies in the amount of 63bn cubic metres per year under the project are to start from the Beregovaya compressor station in Russia and reach Bulgaria through the Black Sea.

 

Sofia Airport passengers up by 13.6% y/y in Oct

The Sofia Airport reported a 13.6% y/y growth in the number of serviced passengers to 285,000 in October, investor.bg reported quoting a company statement. The increase was driven by a 15% hike in the number of international and charter flights. The number of passengers in the internal lines increased by 3% y/y. The cargo and post volume went up, too, by 13% y/y to 1,436 tonnes. The airport also posted an 11.3% increase in the number of flights, driven by growth in both the regular and the charter flights segments by 13% y/y and by 14% y/y, respectively. The positive trend is expected to continue during the winter season, starting end-October and ending March 27, 2011, for which over 7,600 flights have been booked, up by 15% from the previous winter season. 

 

Tender for key railway section upgrade attracts 12 Bids

Twelve candidates submitted bids in a tender for rehabilitation of Plovdiv-Burgas railway section, Dnevnik daily reported. Among the bidders are Bulgarian companies as well as companies from Italy, Greece and Austria. This is the second attempt of the National Railway Infrastructure Company (NRIC) to select a company to carry out the upgrade, after the previous tender was cancelled as prohibitive costs exceeded the project's provisional budget. The rehabilitation of the 290-km section, to link Bulgaria's second biggest city of Plovdiv with Burgas on the Black Sea coast, will improve the trains' speed to 130-130 km/h compared to the current average speed of 80 km/h. NRIC is to select the tender winner by January 15, 2011. The project is to be completed within four years and six months. 

 

Japan's Wind Energy 2007 to build 100 MW wind park near Sliven

Japan's Wind Energy 2007 plans to build an 100 MW wind park near Sliven, southeastern Bulgaria, econ.bg reported, quoting a press release of the local administration. No details on the investment and the number of turbines were provided. During the meeting between representatives of the company and the local authorities, the investor said it will also build a substation and the necessary infrastructure, starting next spring. The contract for connection of the production capacities to the national grid is to be signed in February 2011. The wind turbines supply is scheduled for end-2011 and early-2012, while their installation will take place by autumn 2012. The Japanese investor will call a tender for local subcontractors. 

 

 

 

Drug company Huvepharma plans acquisitions of competitors

Bulgaria-based pharmaceutical company Huvepharma is planning global acquisitions, Dnevnik business daily reported citing company president Kiril Domuschiev. In the end of September, private equity investor Citi Venture Capital International (CVCI) agreed to buy around 38% of Huvepahrma. The deal is expected to be closed by the end of the year. According to Domuschiev, CVCI's entry in Huvepharma's capital structure would support the pharma company's acquisition strategy. ,,We want to take over some of our competitors. This could cost hundreds of million euro, which we, as a Bulgaria-based company, could hardly finance by attracting bank loans. We have found an excellent partner in CVCI with solid contacts with London and New York-based banks," Domuschiev said without giving any details about the acquisition targets. Huvepharma develops, manufactures and sells human and animal health products as well as enzymes for food, feed and industrial applications. The company has production facilities in Bulgaria and in the United States.