불가리아 주요경제 뉴스 (16 - 23 December 2011)

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (16 - 23 December 2011)

 

Sections/headline briefs:

 

 

MACROECONOMY:

• 2012: The economy will slow down
• Pessimism Oppresses Bulgarians in 2012 Economy Outlook - Study
• Standard & Poor's affirms Bulgaria's sovereign credit ratings, outlook positive
• Economic turbulence forecast for 2012

 

 

INVESTMENTS:

·         Private Investor to Take 49% from Maritsa-iztok 2 TPP

 

COMPANIES AND INDUSTRIES:

• Razlog Energy Park applies for license to run 15 MW solar park
• Bulgarian Business Outraged by Govt Corruption – Poll
• Gazprom Sets Foot on Bulgaria Retail Fuel Market

·         Three waste water treatment plant projects signed in Bulgaria

 

 

 

 

 

 

 

 

 

Articles:

 

MACROECONOMY:

 

2012: The economy will slow down

Indications about the debt crisis in the eurozone getting worse raised the political will for the implementation of much-needed structural reforms. The government started a pension reform and made efforts to restructure and privatize the remaining non-performing state-run companies. The Bulgarian economy consolidated its position and reduced criticism form internal political opponents. It seems there would be no need of further restriction of the fiscal policy in 2012. The public sector will have low to no contribution to the GDP growth in 2012. All this would not be enough to compensate the negative effects of the slow recovery in the eurozone. GDP will drop from 2% in 2011 to 1.5% in 2012. Export will contract. Indebtedness of the corporate non-financial sector will fall. In 2012 there will be fewer obstacles in front of Bulgaria's recovery. Most elements required for solving the government debt crisis in the eurozone are now present.
Reducing the indebtedness of the corporate non-financial sector and the adaptation of the real estate market to the new environment will not be completed in 2012. There will be another 2 or 3 years with economic growth lower than the potential. The expectations for the banking sector 2012 will resemble 2011 in many aspects. Accumulating provisions will continue with the same speed. Two preconditions will be needed for banks to able to absorb losses: First - residents' deposits should continue growing. This will allow banks, dependent on foreign financing, to consolidate their positions. Second - a key factor will be the implementation of the plan for restructuring of Greece's sovereign debt. This will improve the situation of Greek mother banks and will allow them to raise financial aid for their subsidiaries on the Balkans and Bulgaria in particular. Bulgarian banks still will be encouraged by local authorities to increase buffers and liquidity. A decisive factor will be the reduction of administrative expenses but without reduction of the services offered in remote areas of the country. Complete recovery of the Bulgarian banking sector will take time. The process is likely to be completed in the end of 2014. Indebtedness reduction of the corporate non-financial sector will be over by that time and GDP growth will be close to the potential, return of capital in the banking sector is expected to be 5 - 10% higher than the price of the capital.

 

Pessimism Oppresses Bulgarians in 2012 Economy Outlook - Study

Over 50% of Bulgarians think it is highly likely that the economic crisis in Bulgaria will deepen in 2012, according to a study released Tuesday by Alpha Research. For next year, 45% of Bulgarians expect delays in payments of incomes, 40% fear a high inflation, 37% expect raises of taxes, and 30% are alarmed that interest rates will go up. All in all, Bulgarians have no good expectations not only for their personal finances, but also for the economic situation in the country, predicting there will be nogrowth in foreign investments, economic output and spending. According to the study, about 18-24% fear even and uncontrolled increase of sovereign budget deficit, mass bank bankruptcies and a shaking-up of Bulgaria's currency board. on that background, the opinion has found that just 4-10% of respondents expect as very likely an increase of incomes and standard of life for 2012. The Alpha Research study further shows that 37% of Bulgarians, among the comparatively more-well off pool, try to save as much as they can. on the other hand, some 47% of respondents, those of lower income, try to purchase as much goods as they can and stock up for financial hardship, fearful thatinflation might eat away any savings they have.

 

Standard & Poor's affirms Bulgaria's sovereign credit ratings, outlook positive

International credit rating agency Standard & Poor's affirmed the sovereign credit ratings on Bulgaria as a reflection of the government's strong track record of appropriate fiscal policy and low gross and net general government debt, the agency said. Bulgaria's long- and short-term foreign- and local-currency sovereign credit ratings were affirmed at BBB/A-3 and outlook is stable. The stable outlook reflects the agency's view that Bulgaria will continue to maintain a favorable fiscal position on the back of ongoing budgetary consolidation and structural reforms. The country's solid medium-term growth prospects, particularly if backed by improving absorption of EU funds also contributed to the positive assessment. on the negative side, Bulgaria's low GDP per capita and large, although decreasing, stock of external imbalances pose risks, given the adverse economic backdrop. Standard & Poor's said economic slowdown in the country's main trading partners, deleveraging in the home countries of Bulgaria's foreign-owned banks and continuously weak domestic demand have resulted in a weaker growth forecast. "We expect the current economic recovery to lose steam in 2012, and growth to decline to 1.5%, from around 2.0% in 2011." The current account is expected to move to positive territory, which will lead to reduction of external debt to around 53% of GDP in 2012. Positive developments are seen in respect to the fiscal policy too as due to commitment to budgetary consolidation, the budget gap is expected to continue declining in 2012 to 1.3% of GDP, despite the ongoing economic slowdown. This will result in general government debt of 17.7% of GDP in 2012. With a capital adequacy ratio of 18% at Q3 2011, the banking sector appears well capitalized and liquid, Standard & Poor's said. The likely spillover effects from a further weakening of confidence in the Greek banking sector are expected to be limited as although Greek banks own about 25% from the market, they are pretty autonomous from their parents. 
We remind that last week, credit rating agency Moody’s said it expects Bulgaria to remain one of the very few low-debt countries in Europe thanks to continued positive growth and fiscal consolidation measures. “Our current estimates point to a 15.5% debt-to-GDP ratio in 2011, far below the median 45.5% for all European sovereigns and a clear outlier in the midst of debt struggles elsewhere in the region,” Moody’s said in a statement.

 

Economic turbulence forecast for 2012

There are encouraging signs for the world's largest economy as 2011 comes to an end. American consumers are spending more, the housing market is improving, and employers are laying off fewer workers. But the unresolved debt crisis in Europe, the slowdown in China and U.S. spending cuts pose a serious challenge for policy makers as 2012 begins. High unemployment in the United States, rising debt and Congress' inability to do anything about it were major stories in 2011. But some bright spots are emerging as the year comes to a close, according to George L. Perry, a senior fellow for economic studies at the Brookings Institution. one was the export sector which grew really very well. Another area was construction outside of home building. Business construction was picking up and construction in particular areas like commercial." U.S. unemployment is at its lowest level in more than two and a half years, and consumer confidence is rising. But there are dark clouds ahead as the New Year begins. China, the world's fastest growing economy, is slowing down, and Europe's debt crisis shows few signs of easing. "We export a great deal to Europe," Perry points out. "And if Europe falls into another recession, that export growth is going to end. And that will affect jobs in the U.S. and cause the U.S. to move towards recession." Rising inflation and the slowdown in Chinese manufacturing have already curbed demand for some commodities. But the slowdown is due in part to Beijing's efforts to prevent its economy from overheating, adds Perry. Reflecting on the global uncertainty, World Bank President Robert Zoellick urged Europe and its biggest trading partners to act responsibly. "Europe has to rescue Europe, okay? And it's very important. If there's any message when I'm asked, 'Well, what can the U.S. do and what can China do?' The best thing they can do is clean up their act at home, be a source of growth at home, and, secondly, be a source of confidence to the market." Zoellick is encouraged by ongoing reforms in China aimed at reducing the country's reliance on exports, but he warned U.S. lawmakers against further delays in dealing with the nation's rising debt, now close to $15 trillion.
"The downgrade of America from triple A didn't affect the finances today, but it may be one of those events people look back on 10 years from now and say, 'Did they get the warning? Did they pay attention or did they continue to do what they were doing?" Unless leaders are willing to make the tough decisions needed to stabilize the global economy, Zoellick and many leading economists say problems in Europe, the U.S. and China could coalesce into a "perfect storm" in 2012 that could rival the financial crisis of 2008.

 

INVESTMENTS:

 

Private Investor to Take 49% from Maritsa-iztok 2 TPP

"A private investor may take up to 49% from the biggest thermal power plant in Bulgaria - Maritsa-iztok 2," Bulgaria's minister of economy, energy and tourism, Traycho Traykov, stated. In 2012, different in size minority shares from the state-owned energy companies may be privatized. A privatization strategy is being presently worked out. Bearing in mind the plans for the construction of new capacities in Bulgaria's biggest TPP - Maritsa-iztok 2, the state-owned shares may be reduced to 51% as there is an idea that the rest 49% be given to a private investor. only Kozloduy NPP will stay 100% state-owned," Minister Traykov is explicit. "The rest of the big state-run energy companies like the National Electric Company, Bulgargaz, Electricity System Operator may sell up to 34% of their shares but Bulgaria's state should keep its control on them," Traycho Traykov added. 

 

 

COMPANIES AND INDUSTRIES:

Razlog Energy Park applies for license to run 15 MW solar park

Razlog Energy Park has asked for a 25-year license from the state energy commission to run a 15-MW photovoltaic park, according to a report of the regulator posted on its website. The facility will be located on 513 decares in the industrial area of the southwest town of Razlog. The solar park should be built by June 2013 in six stages. The project will be run together with Solarpro Holding. The financial details have not been revealed so far. Razlog Energy Park is fully controlled by Alpha Energy Holding, the arm of local Alpha Finance Holding to deal with the production of equipment, the construction and the operating of photovoltaic power plants. 

 

Bulgarian Business Outraged by Govt Corruption - Poll

Only companies that are close to the government and the local authorities winpublic procurement tenders in Bulgaria, according to a survey of the Bulgarian Industrial Association, one of the six major business organizations in the country. Corruption in tenders and EU funding applications increased from 66% to 75% year-on-year, i.e. affecting 75% of all tenders in 2011, according to the survey that polled 500 managers from various sectors of the Bulgarian economy between November 20 and December 7, the leadership of the Bulgarian Industrial Association announced Monday. "Whoever is close to those in power wins the tenders," summarized the surveyresults Bozhidar Danev, CEO of BIA, stressing that firms sponsoring the ruling partyGERB usually win the public procurement procedures. BIA insists on a public register of sponsors, said in turn Sasho Donchev, Chair of theBIA Board, as cited by Mediapool. He said that while political parties do provide data about their sponsors to the National Audit Office, the government ministries and most municipalities do not; he reminded the scandalous donations for Bulgaria's Interior Ministry, with Interior Minister Tsvetan Tsvetanov promising to publish a register with the private sponsors of the police as of September 1, 2011, but having failed to do so since. The greatest violation are in construction and energy, Donchev declared, pointing out as an example the construction of a 36 MW power line by the private-owned southern Bulgarian power utility EVN for BGN 5.4 M only, when three years earlier the state-owned National Electric Company NEK built an identical facility for BGN 11 M. According to the BIA survey, 63% of the polled managers have indicated that healthcare has a high level of corruption, 60% - the judiciary, 56% - the Interior Ministry and Traffic Police, 47% - licensing and permit regime authorities, 36% - public health and sanitary authorities, 35% - customs, 28% - tax administration, 24% - environmental authorities, 21% - labor inspections, 14% - education. "The business sector is plagued with administrative arbitrariness with the constant introduction of new licensing regimes and permits. Instead of decreasing the amount of regulations is increasing dramatically," BIA Board head Donchev said. "The administrative acts are destroying the providers of services to the benefit of a small circle of people. Legislation in Bulgaria is drafted in a horrible way, with many loopholes that are filled with subdelegated legislation that sets the stage for administrative arbitrariness," he added. He further stressed that since the center-right government of the GERB party and PM Boyko Borisov came to power, a total of 170 laws and 1 600 administrative acts have been amended, and while the true benefit of these amendments "remains unknown", the constant changes are instilling insecurity and stress with thebusiness sector. BIA CEO Danev pointed out that the Bulgarian judiciary has the highest disapproval rate among the business respondents – 69%, followed by the Parliament with 67% and the executive with 56%; the tax administration, i.e. the National Revenue Agency (30%) and local authorities (28%) are doing better. "Municipal administration is the only institution that sees growth in approval with businesspeople compared with the previous year. This shows that it is the only one that is starting to acquire a human face," Donchev said.

 

Gazprom Sets Foot on Bulgaria Retail Fuel Market

Russian energy giant Gazprom has acquired a license from the Bulgarian government to purchase 7 filling stations in the country. Gazprom will be acting by means of newly-founded NIS Petrol company, registered in Bulgaria. The company has listed as its fields of activity the exploration and production offuels, as well as storage, logistics, retail and wholesale. Bulgaria's Commission on Protection of Competition has mandated that Bulgaria's retail market for car fuels is structured in such a way that the entry of NIS Petrol will not create a dominant position for Gazprom. Most of natural gas coming into Bulgaria (some 90%) is of Gazprom provenance, coming via various intermediary. Bulgarian company Overgas, owned by Gazprom, also sells a large part of thenatural gas to Bulgaria's households. Earlier in 2011, controversy raged in Bulgaria over whether Lukoil Bulgaria, owned by Russian giant Lukoil, has an excessively dominant position in Bulgaria's retail fuel market.

 

Three waste water treatment plant projects signed in Bulgaria

Three agreements about projects for waste water treatment plants worth nearly BGN 100 million have been signed in the Bulgarian Ministry of Environment and Water in the presence of Prime Minister Boyko Borisov, FOCUS News Agency reported. The projects are financed under Environment OP. The city of Varna has said tourism is a priority of its, but there is no waste water treatment plant, said PM Borisov. Next week a waste water treatment plant will be released in the northern city of Ruse, he said further and added water was an invaluable resource that should not be wasted. BGN 48 million is allocated for the modernization of the waste water treatment plant in Sunny Beach resort. The seaside municipality of Balchik will be granted BGN 32 million to overhaul the facility in Albena resort and BGN 18,6 million will be invested in extending the waster water treatment plant and building 22 km of water and sewerage network in the northeastern town of Tervel. Environment Minister Nona Karadzhova described the projects as important to tourism. In the past two years BGN 800 million was paid - BGN 340 million under Environment OP and BGN 460 million under ISPA.
Half of the funds under Environment OP - BGN 1,8 billion - has been contracted and it is forecast that by the middle of 2012 the rest of the funds will be contracted too. In the past two years and a half the payments increased more than seven times in comparison with the previous period of the program.

 

Reported by:

Georgi Iliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea