불가리아 주요 경제뉴스 (21 - 28 October 2011)

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (21 - 28 October 2011)

 

Sections/headline briefs:

 

 

MACROECONOMY:

·         Bulgaria's government targets 1.35% of GDP deficit in 2012 draft budget law

• Bulgaria's foreign debt drops 1.8% y/y to EUR 36bn at end-Aug 2011

·         Bulgaria's Grey Economy Reaches Up to 30% - Study

·         Home prices in Bulgaria drop 6.1% y/y in Q3 2011

·         Finance minister expects Bulgaria to enter eurozone in 3-4 years

 

INVESTMENTS:

• Germany's Parabel AG, Bulgaria's Monolit To Build 50 MW Solar Park

 

COMPANIES AND INDUSTRIES:

• Bulgaria's general insurance market falls 0.7% y/y in Jan-Aug 2011
• Battery producer Monbat’s sales rise 18.8% y/y in Jan-Sep 2011
• Bulgaria Makes BGN 15 M from Sale of Minority Stake at 'Arsenal' Military Plant
• AtomStroyExport may raise claim against NEC on Belene nuke project to EUR 130mn
• Internet advertisement market to rise 50% this year – e-academy 
  
  

 

 

 

 

 

 

 

 

Articles:

 

MACROECONOMY:

Bulgaria's government targets 1.35% of GDP deficit in 2012 draft budget law

The finance ministry prepared the draft budget law for next year and has already sent it to the other ministries, the trade unions and the employers’ organisations for opinion. The document has been published on the website of the ministry. The government will target a budget deficit of 1.35% of the projected full-year GDP next year, down from the planned 2.5% this year and 1.5% of GDP next year planned in the midterm framework. Consolidated government expenditures (including the contribution to the EU budget) are projected to rise by 5.9% to BGN 29.8bn (EUR 15.2bn) or 36.5% of GDP as compared to 36.8% of GDP this year. In line with earlier announced intentions, the expenditures to the security system will decrease to offset higher spending on education and culture. The capital expenditures of the government will increase by 43.8% to BGN 5.24bn as compared to 2011 to meet state contribution to EU-financed projects mainly. Total revenues are projected to amount to BGN 28.7bn, up by 9.6%. The government does not plan to change direct tax rates but will increase the excise taxes on some goods to the minimum EU levels. Also, it hopes to improve indirect tax revenues compliance. The government debt is projected at about 18.7% of GDP at the end of 2012. The ministry plans gross financing from the domestic market in the amount of BGN 1.2bn and EUR 1.2bn net external financing. Like this year’s budget law, the latter includes an option for bond placing on the international markets of some EUR 1bn. The budget for next year is based on a 2.9% economic growth speeding slightly from 2.8% this year but down from 4.1-4.2% projected in the spring. The average inflation rate is expected to decelerate to 3.2% next year from 3.8% this year. The government has set a fiscal reserve threshold of BGN 3bn as of the end of 2012, down from BGN 4.5bn in 2011 budget law. 

 

Bulgaria's foreign debt drops 1.8% y/y to EUR 36bn at end-Aug 2011

The gross external debt declined by 1.8% y/y and 0.5% in a month to EUR 36.04bn as of end-August, according to preliminary data of the central bank. The foreign liabilities of the public sector fell by 3.3% y/y. The private sector reduced its foreign debt by 1.6% y/y again as a result of the activity of the banking sector (contraction of the short-term deposits of foreigners and the short-term loans of the local banking system). The total foreign debt accounted for 92% of the revised full-year GDP projection as compared to 101.8% of GDP a year earlier. The short-term debt, covering liabilities with original maturity of one and less than one year, went down to 29.8% of the total as compared to 30% a month earlier and 30.5% a year earlier. The credits on demand accounted for 24.4% of the total external debt (slightly up from 24.3% a month earlier but down from 25.2% in annual comparison) and 61.3% of them were reported as inter-company loans. The share of total inter-company loans, which are not included in the short-term debt statistics, accounted for 40.6% of the total external debt, up by 0.2pps in a month but down by 0.3pps in annual comparison. The ratio of foreign reserves to short-term debt improved to 122% at the end of August as compared to revised 115.1% a month earlier and 111.5% at the end of August last year. It is still weaker compared to more than 120% at end-2007 and about 300% in 2002-2004. 

 

Bulgaria's Grey Economy Reaches Up to 30% - Study

20-30% of Bulgaria's economy is in the shadowy sector known as grey economy, according to a study revealed Thursday by the economics unit of the Bulgarian NGOCenter for the Study of Democracy. According to the research, the fields most affected by grey economy are construction, retail,the restaurant business, fuel tradeand healthcare. esearchers have commented that among the most frequent reasons for carrying shady activities are tax and social security policies, as well as regulatory requirements for quality. Another interesting fact revealed in the study is that representatives of a given business branch as a rule underestimate the level of grey economy within their branch and to overestimate it elsewhere. on a more alarming note, the study has revealed that there are some unemployed250,000 persons in Bulgaria who cannot specify why exactly they do not work, which suggest some of them may be engaged in shady or illegal activities.

 

Home prices in Bulgaria drop 6.1% y/y in Q3 2011

The average prices of homes fell by 6.1% y/y to BGN 901.3 (EUR 460.8) per square metre in Q3 2011, data by the statistical office showed. The decline narrowed from 6.4% y/y as compared to a quarter earlier. Data referred to existing apartments sold in district towns and excluded newly built and luxury apartments. The price level declined by 0.8% during the quarter as compared to 1.6% q/q in Q2 2011. Prices increased in quarterly terms in eight of the 28 regional centres in the country, up from five in the previous quarter. The prices in the Northern Black Sea city of Varna were the highest (BGN 1,493, down 1% q/q) in Q3, followed by those in the capital city of Sofia (BGN 1,456, down 0.6% q/q), the southern Black Sea city of Burgas (BGN 1,184, up 1.8% q/q) and the country’s second largest city of Plovdiv (BGN 976, up 1.9% q/q). 

 

Finance minister expects Bulgaria to enter eurozone in 3-4 years

Finance minister Simeon Dyankov said in an interview for Deutsche Welle that the country is to enter the eurozone in next three to four years. Minister Dyankov confirmed that the single currency adoption remains a priority for the government. Dyankov sees no risks for the stability of the banking system and the public finances as a result of the ongoing debt crisis in Greece, but noted that a slowdown of the economy is expected by the end of the year as the country’s main trading partners have already been affected adversely. In July, Dyankov said for Reuters that the cabinet will postpone the talks for adopting the euro until the debt crisis in the EU is resolved. Dyankov elaborated that the government wanted to see how the EU authorities will stabilise Greece and what the final stance on the proposed harmonisation of members’ tax regulation would be. 

INVESTMENTS:

Germany's Parabel AG, Bulgaria's Monolit To Build 50 MW Solar Park

A joint venture of Bulgaria's Monolit and Germany's Parabel AG will build a 50 megawatt solar park near the village of Maglizh, in southern Bulgaria, local media reported. The photovoltaic park will cover a total area of 140 hectares and its average annual output is expected to satisfy the energy needs of 20,000 households, specialized property weekly Gradat (www.gradat.bg) reported last week. The produced energy will be sold to Bulgaria's National Electrical Company. Construction works are expected to be completed by May 24, 2012. Parabel AG (www.parabel-solar.com), founded in 1992, is focused on planning individual photovoltaic and solar thermal systems and trading in modules and collectors. Monolit is a Haskovo-based construction company, set up in 1994.

 

 

 

COMPANIES AND INDUSTRIES:

 

Bulgaria's general insurance market falls 0.7% y/y in Jan-Aug 2011

The gross revenues from general insurance premiums decreased by 0.7% y/y to BGN 886.3mn (EUR 453.1mn) in Jan-Aug 2011 speeding from 0.5% y/y in Jan-Jul, according to data of the financial supervision commission. The claims on general insurance contracts reached BGN 425.9mn, down by 9% y/y. Life insurance premium incomes increased by 2.6% y/y to BGN 163.2mn in Jan-Aug (down from 3.7% y/y in Jan-Jul) and the corresponding claims dropped by 1.1% y/y to BGN 64.2mn. The premium revenues of voluntary health insurance companies fell by 6.9% y/y to BGN 27.9mn in Jan-Aug speeding from 4.9% y/y in Jan-Jul. The value of the corresponding claims rose by 3.2% y/y to BGN 16.2mn. The number of persons holding health insurance contracts reached 194,335 as of the end of August, down by 7.1% in a year. 

Battery producer Monbat’s sales rise 18.8% y/y in Jan-Sep 2011

The net consolidated sales of Bulgaria's largest car battery producer Monbat increased by 18.8% y/y to BGN 152.6mn (EUR 78mn) in Jan-Sep accelerating from 12.5% y/y in Jan-Aug, according to information posted on the website of the local stock exchange. In September alone, sales declined by 3.2% y/y to BGN 17.9mn and the contraction narrowed significantly from 23.8% y/y in August. The pre-tax profit of the company turned to decline of 2.4% y/y to BGN 14.95mn in Jan-Sep as the indicator plunged by 87.95% y/y to BGN 225,000 in September. The producer explains the deterioration with exchange rate loss after revaluation of a USD-loan, expenditures on disposal of waste of the recycling activities, decrease of the sale prices of the batteries as a result of the lower lead price, and lead purchases from entities outside the Monbat group. Monbat projects net sales in the amount of BGN 176.3mn, net profit of BGN 21.7mn and EBITDA of BGN 34mn this year. The consolidated results comprise those of Monbat and its unit Monbat Recycling. In April 2010, Monbat decided to spin off its recycling operations in order to improve its efficiency and make its activities more attractive to potential foreign investors.

 

Bulgaria Makes BGN 15 M from Sale of Minority Stake at 'Arsenal' Military Plant

The Bulgarian state has picked a buyer for its 35.78% share at "Arsenal Kazanlak", one of the largest military factories in the Balkans, the Privatization and Post-privatization Control Agency announced. The buyer of the minority stake is the actual majority shareholder, "Arsenal 2000", a private firm, which will own 99.63% of the Arsenal military plant located in the town of Kazanlak in Central Bulgaria, once the deal is complete. Arsenal 2000 is to pay the purchase price of a total of BGN 15.1 M through a direct cash transfer into the account of the Bulgarian Privatization Agency. Theprivatization contract is supposed to be drafted within 30 days. A total of three bidders bought tender papers for the privatization of the minority stake at Arsenal Kazanlak; however, one failed to provide the necessary request for access to classified information, and another pulled off on its own. Arsenal 2000 bought 51% of the capital of Arsenal Kazanlak in 1999 for BGN 3.9 M. Two years later, it purchased another 12.85% of the large military factory for BGN 983 000. According to the register of the Privatization Agency, the buyer has so far met all of its privatization commitments. In March 2011, Bulgaria's Borisov Cabinet decided the Bulgarian state will no longer be required to keep a 34% share in formerly fully state-owned defense industryplants, thus paving the way for the complete privatization of what remains in terms of state assets in partially privatized military plants. The formal motives of the Economy Ministry to shed the obligatory minority state quotas in the formerly fully-state owned military industrial complex were that the measure will ease the privatization procedures and will help attract more investments in the defense industry. The requirement that the state should keep a minority stake in the privatized military plants was made in March 1998 by the right-wing government of PM Ivan Kostov. Back then, the Kostov Cabinet approved a list of 25 companies from the military-industrial complex where the state was supposed to keep a minority stake; the Kostov government also envisaged the creation of a special institution to manage thestate-owned stakes. Also in March 2011, the Bulgarian government opened a one-stage tender to sell the 35.8% minority stake it still holds in one of the largest military factories in the country, Arsenal Kazanlak, which produces arms suitable for use by NATO, and employs 5 000 people. The bidding requirements asked for companies involved in weapons production, with an annual income of at least BGN 40 M in the past year, the privatization agency said in a statement on Friday. Binding bids from the potential buyers of the government stake in Arsenal Kazanlak, which employs 5 000 people, should be submitted by the middle of December. After the sale of the minority stake in Arsenal Kazanlak, the Bulgarian government remains the sole owner of the capital of three military production complexes: VMZ Sopot, NITI Kazanlak, and TEREM (a military repair complex of eight plans which are in different privatization stages). According to Economy Minister Traicho Traikov, state arms trading company Kintex will not be privatized. For the time being the state is failing to privatize NITI Kazanlak because the company has a legal dispute for land ownership with the other military plant in the town, Arsenal Kazanlak. The troubled VMZ Sopot (located in Sopot close to Kazanlak) is one of the largest Bulgarian military plant, and is also expected to be privatized in 2011. Candidates applying to buy VMZ Sopot will be eligible to bid for it if they demonstrate they have enough funds to cover its mounting debts, according to the strategy for theprivatization of VMZ Sopot, and the future owner  will not be allowed to lay off workers in the first three years after buying it. The VMZ Sopot plant employs 3 700 workers. The bulk of the Bulgarian military-industrial complex was created during the communist period when the People's Republic of Bulgaria made lots of cash by selling arms mostly to developing countries. Together with the former USSR and the former Czechoslovakia, Bulgaria was the third COMECON member specializing in the defense industry. The sale of the minority stake in Arsenal Kazanlak adds another BGN 15 M to the account of the Privatization Agency, which is supposed to raise BGN 450 M from the sale of state assets in 2011 – as the government requires it to in order to fill gaps in the state budget. This is the third larger privatization deal in Bulgaria in 2011 after the sale of "Industrial Construction Holding", a state company, to a local private investor for BGN 12.01 M, and the sale of state cigarette-making giant Bulgartabac to Russian bank VTB for EUR 100.1 M.

AtomStroyExport may raise claim against NEC on Belene nuke project to EUR 130mn

Russia’s AtomStroyExport, part of the state Rosatom, is considering raising the value of the claim against the National Electricity Company (NEC) regarding delayed payments for completed activities under the Belene nuclear project to EUR 130mn, mediapool reports quoting president of AtomStroyExport Alexander Gluhov. The increase of the amount results from delayed payments on more completed activities. We remind that in July, the Russians filed a EUR 58mn claim at the International Court of Arbitration at the International Chamber of Commerce in Paris regarding the above issue. Earlier this month, Bulgarian economy minister Traycho Traykov informed that NEC has filed a counterclaim against AtomStroyExport. NEC has said earlier that AtomStroyExport should pay EUR 61mn for the purchase of the old equipment, which has been settled in a contract, and that it would turn to the International Court of Arbitration at the International Chamber of Commerce in Geneva regarding the redemption of the equipment. In February 2008, Atomstroyexport signed a EUR 4bn preliminary contract to build the 2,000 MW nuclear power plant. In December 2010, the maximum price for the construction of the nuclear power plant was set at EUR 6.298bn. on Oct 3, NEC and the Russian company signed 14th annex to the preliminary contract for the construction of a nuclear plant in the Danube town of Belene delaying the final decision on the project by six more months until Mar 31, 2012.

 

Internet advertisement market to rise 50% this year – e-academy 

The internet advertisement market will increase by 50% to EUR 30mn this year, according to Plamen Rusev, the chairperson of e-academy, quoted by investor.bg. The surge is due mainly to the strengthening of the advertising in the social networks, especially Facebook. The numbers are not official but are based on the advertisement budgets of the business sector. The share of the internet segment of the advertisement market in Bulgaria is 7% as compared to 10-12% in the CEE countries and 30% in the UK. According to the chairperson of the advertisement agencies chamber Krasimir Gergov, the internet advertisement segment accounted for 4% of the total market last year and was the only part, which posted growth (11%) last year and is forecast to speed up this year. 

Reported by:

Georgi Iliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea