불가리아 주요 경제뉴스 (29 April – 5 May 2011)

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (29 April – 5 May 2011)

 

Sections/headline briefs:

 

MACROECONOMY:

• Bulgarian Economy to Grow 2.5% by end-2011

·         Bulgaria's economy grew 1% in Q1 2011 - Centre for Economic Development

 

INVESTMENTS:

• INTERVIEW - Insufficient Grid Capacity Stalls Italgen's Expansion Plans in Bulgaria
• INTERVIEW - Siemens Sees IT Outsourcing Thriving in Bulgaria in Short Term

·         Shocked Investors: New Law Shatters Bulgaria's Renewable Energy Sector

 

COMPANIES AND INDUSTRIES:

• Wholesale Price of Sugar Up by 56% in Year, Flour 53%
• Drugmaker Sopharma improves net profit by 3% y/y in Q1 2011.

·         Bulgaria's Agriculture Sector with Impressive Export Growth in 2010

 

 

 

 

 

 

 

 

Articles:

 

MACROECONOMY:

Bulgarian Economy to Grow 2.5% by end-2011

Bulgarian economy is set to grow between 0.5 and one percent in the first quarter of 2011, the Center for Economic Development said. Bulgaria?s GDP growth is expected to speed up in the second quarter, reaching at least 2.5% at the end of 2011. However, the center?s experts doubt that Bulgaria?s economy will grow more than three percent by the end of the year, as it is expected by the Cabinet, owing mostly to the still shrinking construction sector. Bulgaria?s industry is expected to reach ten-percent y/y growth by the end of Q1 2011. According to the Center for Economic Development, the sector of agriculture will start recovering from the current stagnation and will register a slight growth by the end of the year. Foreign investments in the Bulgarian economy may reach two billion euro by the end of 2011, while the inflation rate will not exceed five percent, unless there is a sharp increase in the prices of fuels.

 

Bulgaria's economy grew 1% in Q1 2011 - Centre for Economic Development

Bulgaria's gross domestic product (GDP) increased by between 0.5 per cent and one per cent in the first quarter of 2011, according to estimates of the Centre for Economic Development (CED). The improvement in the country's economy will accelerate in the second quarter of 2011, bringing the annual growth rate to at least 2.5 per cent this year, analysts said. The rate is not forecast to exceed three per cent in 2011, despite Government projections for a GDP increase of 3.6 per cent. CED's report is based on official statistics data, which showed that the country registered a 5.5 per cent contraction in GDP in 2009, the first crisis year for Bulgaria's economy. The crisis took its toll in the last quarter of 2009, prompting a 7.6 per cent decline in GDP on an annual basis. 2010 marked the exit from the downturn, which was, however, weak and unstable, leading to an annual drop in GDP of 0.2 per cent. Construction was the industry hardest hit by the crisis, while manufacturing was the most flexible sector to cope with the turmoil. The finance, credit and insurance segment, as well as real estate and business services, were the only industries to escape the crisis, according to the report.

 

 

 

 

 

 

 

INVESTMENTS:

 

INTERVIEW - Insufficient Grid Capacity Stalls Italgen's Expansion Plans in Bulgaria

Italian energy group Italgen is planning no expansion on the Bulgarian renewables market, which it entered last year, due to insufficient grid capacity, its managing director Giuseppe De Beni said. Bergamo-based Italgen, part of cement producer Italcementi, has set up a joint venture company with wind turbines manufacturer Leitwind to build and operate two wind farms of nine megawatts (MW) each in Kavarna, on Bulgaria's Black Sea coast, that would be able to supply electricity to 14,000 households. De Beni and Leitwind CEO Anton Seeber both said their companies will not be developing further projects, until the upgrade of the grid is completed. They did not want to face the same problems they saw last summer, Seeber and De Beni told SeeNews in an interview held on the sidelines of the round table "Renewable energy: from thoughts to action", which took place in Sofia last month. Last summer tens of thousands of tourists and residents in resorts and residential areas north of the Black Sea city of Burgas were left without electricity for more than 30 hours after a high-voltage transmission line of the national electricity system operator broke down due to overloading. Following the incident the state energy regulator required Bulgarian state-owned power grid operator NEK to prepare a detailed report on the investments it has made to increase the security of its grid over the last few years. NEK, in turn, pledged to invest some 40 million levs ($30.3 million/20.4 million euro) in new transmission capacities along the Black Sea coast in order to prevent power failures in the densely built seaside resorts. NEK's former executive director Krasimir Parvanov has said that NEK will refuse to connect new renewable energy sources to the grid until the middle of 2011 at least due to the grid's insufficient capacity and the shortage of funds at the company. De Beni explained that Italgen's two wind farms at Kavarna had waited long time before being fully connected to the grid and problems related to the limited capacity of the grid still persist. Bulgaria's parliament adopted new renewable energy legislation that has sparked criticism among investors in the sector. The bill, awaiting its signing into law by the Bulgarian President and publication in the state gazette to take effect, has cut the period, in which the state will be obliged to buy energy from wind parks, to 12 years from 15. The Bulgarian Wind Energy Association said last week it was going to appeal the new legislation before all competent authorities. Anton Seeber said Leitwind was not working on new projects in Bulgaria, but was in talks with wind farm developers from Bosnia, Poland, Croatia and Serbia, where this sector is still nascent.

 

INTERVIEW - Siemens Sees IT Outsourcing Thriving in Bulgaria in Short Term

IT outsourcing business will thrive in Bulgaria in the next three years, driven mainly by the well-qualified cost-efficient labour force in the country, a senior official at Siemens IT Solutions and Services said. Bulgaria has a very competitive labour-cost basis compared to the whole Eastern European region. Its biggest advantages are the well-educated, relatively cheap work force and the convenience of the country's EU membership," Juraj Hupka, Siemens IT Solutions and Services Sales Manager, Outsourcing Services, Central and Eastern Europe, told SeeNews on the sidelines of Outsourcing - Directions of Development, Benefits and Risks conference held in Sofia on April 20. The conference was organised by Bulgarian business and financial news daily Pari (www.pari.bg) with SeeNews as partner. Hupka expects that IT outsourcing will expand not only in Sofia but in Bulgaria's smaller cities and towns. Based on what I have seen on the Slovak and the Czech markets my guess is that the boom will start in Sofia and then move to the towns in the country. Investors in the sector would go out of the capital because they would not find enough labour resources there," Hupka said. He sees the expected spread of IT outsourcing in Bulgarian towns as beneficial because it is more cost efficient for the companies and it is also helpful for the regional development of the country." It is also a good career opportunity for young professionals, Hupka said, because over time the IT companies invest in their training. And with the advance of the employees' expertise and skills the salaries in the sector will go up, too," he added. Hupka emphasized that the Bulgarian government should give some incentives to the outsourcing business to develop as well, mainly by providing infrastructure. If you want to build a big centre you really need to have proper infrastructure, such as airports and highways. Even IT companies, which do not transport large amounts of goods from one place to another, are looking at this as a crucial factor," Hupka said. He also stressed that the state and businesses in Bulgaria should both put greater efforts to market the sector internationally as its development has positive effects for other industries and the economy overall. Global investments in the country made by leading IT companies are positive signals for other businesses too, and not only major ones, but also small and medium-sized ones," Hupka said. Such investments are long-term and are a sign of trust. This is the right path for Bulgaria's outsourcing sector and attracting more global investors can really boost the economy."

 

Shocked Investors: New Law Shatters Bulgaria's Renewable Energy Sector

Bulgaria's newly adopted Renewable Energy Act contradicts the Constitution and EU law, and will shatter the country's energy future, according to the BulgarianWind Energy Association. The Bulgarian Wind Energy Association issued Wednesday a devastatingly critical statement on the highly controversial law, whose adoption had been anticipated eagerly by hundreds of local and foreign investors only to see their hopes for facilitated investments dampened. "We are highly disappointed with the new Renewable Energy Act and we believe that it will have severe consequences for the Bulgarian economy. We want to draw attention to its three major flaws: 1) it places Bulgaria at huge financial risk in the event of a failure to reach the EU 2020 renewable energy target; 2) it is in direct violation of the Constitution of the Republic of Bulgaria and EU directives; 3) it will sacrifice the entire renewable energy sector with thousands of jobs, investment and income for underdeveloped regions, and, most importantly, will sacrifice Bulgaria's security and energy independence," the Bulgarian Wind Energy Association stated. The wind energy investors argue that Bulgaria's meeting of the EU 2020renewable energy goal must be the cornerstone of the country's sustainable and independent future, and a major factor in EU policies for combating climate change. "Instead of encouraging the development of renewable energy in Bulgaria the new law is practically creating conditions for the complete freeze of the industry, and will have very severe consequences in the near future," the statement says.

The investors point out that every percent below Bulgaria's EU 2020 target will cost the country BGN 200 M per year, which means BGN 13 more for the annual electricity bill of each Bulgarian household. At the same time, the total cost of wind energy at the moment adds BGN 0.28 to the bill of every household. The Association says that even if all of the planned wind energy projects with a combined capacity of 2 500 MW start working right away, this sum will rise only to BGN 0.92 because of the preferential prices for renewable energy abolished with the new law. The wind energy investors argue the law violates the Constitution and EU regulations by introducing post-dated measures regarding investment projects under development, which "undermines the trust in Bulgaria as an investment destination." "What is more, while EU directives stipulate that RE projects must get a priority access to the power grid, the law places RE behind all other kinds of energy. For example, it places limits on renewable energy sources that do not exist for any other conventional energy source," the investors complain. According to their statement, however, the worst flaw of the Bulgarian Renewable Energy Act is that the investors will be finding out the price at which they will be selling their energy only after the construction of their power generating facilities is completed. "For each investor this means that they will have to work for years on their project, to create dozens of jobs, and invest big in equipment and construction while in the meantime the state regulator will be able to change the electricity purchasing price without any restrictions and without any predictability for the investor. This lack of clarity is an insane risk that no sane investor, a bank or a serious person, could assume. The result will be that not a single well-founded wind energy project will be realized until this law is changed. The Bulgarian Wind Energy Association will use all of its resources to dispute this law. We will not stand idly by watching how this law destroys investment and jobs, and is ruining the trust in Bulgaria," the declaration concludes. According to its website, the Bulgarian Wind Energy Association was founded in June 2010, and currently has more than 40 members; the association unites the majority of companies active in the Bulgarian wind energy sector including manufacturers, developers, financial and technical consultants and law firms.

 

COMPANIES AND INDUSTRIES:

 

Wholesale Price of Sugar Up by 56% in Year, Flour 53%

Bulgaria's wholesale market price index started to go slowly up in the second half of April 2011, reaching 2.023 points at the end of the month, the State Commission on Commodity Exchanges and Wholesale Markets says. At end March 2011, the index stood at 1.982 points. The wholesale price of sugar increased by 2.4 per cent in April 2011 compared with March 2011, reaching 2.14 leva per kilogramme. The wholesale price of white brine cheese increased by between 5 and 6 per cent to 4.86 leva per kilogramme, and the prices of other milk products went up by between 0.5 and 1.8 per cent. Meat product prices increased by between 1 and 3 per cent. In April 2011 compared with April 2010, the wholesale price of sunflower oil increased by 44.5 per cent, the price of flour increased by 53 per cent, and that of sugar by 56 per cent. The wholesale prices of lentils, milk products, fish and chicken increased by between 20 and 30 per cent. Smaller increases of between 0.5 and 8 per cent were registered for common beans, rice, pork, and meat products. Decreases were observed with eggs, by 20 per cent, and frankfurters, by 6 per cent. The prices of most fruits and vegetables were higher in April 2011 than in March 2011. The largest increases were recorded for greenhouse tomatoes, by 18 per cent, oranges, 17 per cent, and apples, 15 per cent. In April 2011 compared with April 2010, the prices of potatoes and garlic increased by between 70 and 80 per cent, apples and cabbage by some 40 per cent, and bananas, oranges and carrots by between 7 and 11 per cent.

 

 

Drugmaker Sopharma improves net profit by 3% y/y in Q1 2011.

The net profit of the country’s leading pharmaceutical producer Sopharma rose by 3% y/y to BGN 13.2mn (EUR 6.7mn) in Q1, the non-consolidated report of the company posted on the website of the local bourse showed. In line with earlier information, the revenues of the company went up by 13.5% y/y to BGN 53.7mn, respectively, as export sales expanded by 21% y/y while those on the domestic market declined by 2%. The Russian market accounted for 42% of total sales, followed by the local market (29%) and the Ukrainian market with 17%. The company estimates its market share in Bulgaria at 5% in value terms (fourth largest market player) and 13% in production volumes (second largest after Actavis). Last month, Sopharma’s CEO Ognyan Donev announced plans the company to raise sales by some 12% in 2011, which is about the same expansion like in the previous two years. 

Bulgaria's Agriculture Sector with Impressive Export Growth in 2010

Bulgaria's agriculture sector appears to be taking off, according to data presented by the Agriculture Ministry and the National Statistical Institute. Agriculture is one of the few sectors of the Bulgarian economy with positive trade balance, according to the Bulgarian Ministry of Agriculture and Foods. In 2010, Bulgaria's agriculture trade balance was positive USD 944 M, up from a positive USD 385 M in 2009. The Agriculture Ministry boasts that what it describes as "proactive export policies of the state have led to increasing the export potential of Bulgarian agricultural products." Thus, in 2010 Bulgaria's agriculture exports amounted to USD 3.468 B compared with USD 2.795 B in 2009, a year-on-year growth of 24%. About 72% of the Bulgarian agricultural export goes to the rest of the EU with Russia, Ukraine, Turkey, and the Arab world re-emerging as important markets as well. Agriculture occupied a share of 17% of Bulgarian exports in 2010, compared with a share of 10% of the Bulgarian imports. In 2010, even though its share of the Bulgarian GDP was only 5.2%, its gross added value grew by 10.9% year-on-year, amounting to BGN 3.67 B, which is 6% of the gross added value generated by the Bulgarian economy last year. on quarterly basis in 2010, Bulgaria's agriculture registered the fastest growth of all economic sectors. The Agriculture Ministry points out that Bulgaria is one of the top eight EU member states in terms of the growth of the average income from agriculture. In 2010, Bulgaria's average agriculture income grew by 23% compared with 12.3% for the EU 27. The Ministry points out that Bulgaria's growth has surpassed the growth rates in older EU member states such as Germany, Spain, the UK, Greece, and Portugal. Based on 2005 output, in 2010 Bulgaria registered the highest growth ofagriculture income in the EU – 54.2%, compared with 10% for the EU 27 on average. According to the Bulgarian Agriculture Ministry, fallow land in Bulgaria declined by 15% in 2010 compared with 2006, and is down to 8% of the total agricultural land in the country compared with 9.1% in 2006. The Ministry further boasts an increased rate of processing projects applying for funding from the EU Rural Development Program. It says that 36% of Bulgaria's total funds under the program for 2007-2013 have been contracted, and 19.7% have been paid out to beneficiaries, which means that the program has the highest level of absorption of all EU programs in Bulgaria. The Ministry has asked the European Commission for changes in the program in order to benefit the animal breeding sector of agriculture. In 2010, animal breeding was 30.9% of the Bulgarian agriculture sector, and grew by 4.6% compared with 2009. The income from cattle breeding grew by 36.5%, from eggs – by 10.2%, from sheep and goats – by 2.5%. A total of BGN 177.5 M were paid in subsidies to animal breeding farmers in 2010 compared with BGN 123.7 M in 2009. The Ministry of Agriculture says it is restructuring the management of forests, and has not allowed construction in the forest plots acquired through the notorious land swap deals carried out by the previous two Cabinets. In 2010, the Ministry raised BGN 21.7 M by renting agricultural land and pastures compared with BGN 12 M in 2009.

 

 

Reported by:

Georgi Iliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea