불가리아 주요 경제뉴스 (23 May – 1 June 2012)

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (23 May – 1 June 2012)

 

Sections/headline briefs:

 

MACROECONOMY:

       Business sentiment in Bulgaria marks strong improvement in May

       Moody's Affirms Bulgaria's Stable Outlook, Less Optimistic than Govt

       President Plevneliev for CNN: Bulgaria Better Off than Greece

       Bulgarian govt negotiates 75% of 2007-2013 EU funds as of end-April 2012

INVESTMENTS:

 

 

COMPANIES AND INDUSTRIES:

       EBRD mulls financing 10MWp solar power plant construction in Bulgaria

       Bulgaria to Produce 1.5 Tons of Rose Oil in 2012 – Expert

       Bulgaria to Finalize Large-Scale E-Govt Project in 2013

       Bulgarian PM Seals Arms Deal Worth BGN 150 M with Iraq

       5 Hydropower Plants to Be Built on Maritsa River in Bulgaria

       Lukoil Starts Building USD 1.5 B Hydrocracking Plant in Bulgaria

       Moscow Claims EUR 1,1 B as Compensation for Belene Project

       Bulgaria expects increase in tourist numbers, revenue in 2012

 

 

 

 

 

 

 

 

Articles:

 

MACROECONOMY

Business sentiment in Bulgaria marks strong improvement in May

In May, the composite business sentiment indicator reached its highest value since November 2008, the monthly survey of the national statistics institute shows. The indicator increased by 2.8pps in monthly terms to 21.33 in May. The improvement is recorded for a third consecutive month. In annual terms, the business climate also improved by 3.8pps - a much stronger growth than 1pps and 0.2pps registered in April and March, respectively. The sentiments in the manufacturing sector remained broadly unchanged from the previous month. The construction sector sentiment was more optimistic by 1pps m/m due to a lower contraction of business activity and an upsurge in new orders. Sentiments in the retail and services sector improved by 10.3pps m/m and 1.8m/m in May, respectively. IntelliNews Comment: In May, the business sentiments indicator exceeded its 12-month average for the second time since October 2011. It is however still below its long-term average, indicating that economic growth will slow down in 2012, which is expected by the government and the international institutions as seen in the downgrade of their projections for this year. 

 

 

Moody's Affirms Bulgaria's Stable Outlook, Less Optimistic than Govt

One of the major global credit rating agencies, Moody's, has confirmed Bulgaria's government bond rating and stable outlook in its annual credit report on the country, issued Tuesday. Moody's Investors Service says that Bulgaria's Baa2 government bond rating and stable outlook reflect its moderate levels of economic and institutional strength as well as high government financial strength, which contribute to the country's moderate susceptibility to event risk. Bulgaria’s sovereign debt is rated BBB by Standard & Poor's, and BBB- by Fitch. The agency points out that Moody's report is an annual update to the markets and does not constitute a rating action, and that it determines a country's sovereign rating by assessing it on the basis of four key factors - economic strength, institutional strength, government financial strength and susceptibility to event risk - as well as the interplay between them. According to Moody's, the moderate assessment of Bulgaria's economic strength reflects a mid-sized economy of approximately USD 54 B and average incomes that are in the very middle of incomes globally, plus an increasing diversification of economic activity. As a consequence, Bulgaria's concentration in natural resource-based exports is declining, which should improve the economy's stability and reduce its cyclicality, thecredit rating agency says. "Although structural reforms undertaken to gain EU membership plus strong foreign direct investment (FDI) and other capital inflows drove rapid income growth in the years leading up to the 2008-09 global financial crisis, average wealth is less that 50% of the euro area average. The government's National Reform Programme sets an ambitious goal of raising Bulgaria's standard of living to 60% of the euro areaaverage by 2020," Moody's annual report on Bulgaria states. Moody's assesses Bulgaria's institutional strength as moderate, "as its capacity was strengthened in the process of EU accession and as the macroeconomic policy framework has been fairly predictable for some time." Nonetheless, Bulgaria's government effectiveness and particularly the rule of law score rather low on international surveys conducted by the World Bank, due to the need to further tackle corruption, the agency stresses. "Moody's considers the [Bulgarian] government's financial strength to be high based on its healthy finances, with low debt compared with its peers in the euro area. The general government deficit shrank to 2.1% of GDP in 2011 (compared with the Maastricht limit of 3% of GDP) from 3.1% in 2010, a trend that has strengthened market confidence despite the intensification of the euro area debt crisis late last year and the integration of the Bulgarian and Greek economies and banking systems," Moody's says, while noting that the [Bulgarian] government expects the deficit to fall to 1.6% of GDP in 2012, compared with Moody's forecast of around 2%. However, Moody's "is not as optimistic as the government given still-highunemployment, anaemic expansion in industrial output (which will contain the rise in income from spending-related taxes, household incomes and company profits), and as import demand is likely to remain subdued (limiting the growth in import-related revenues)." Bulgaria's susceptibility to event risk is "judged as moderate, which mainly reflects the economy's extensive euroization, the significant presence of Greek-owned financial institutions in the local banking system, high external debt and weak external liquidity, which pose risks in the highly unlikely event of a change in the monetary policy regime (the currency board arrangement - CBA - in which the lev has been pegged to the euro at roughly 2 per euro since 1997)."

President Plevneliev for CNN: Bulgaria Better Off than Greece

Bulgaria's president has told CNN his country is stable and in better financial shape than neighboring Greece despite high unemployment. "Young Bulgarians are in a much different, more interesting and positive situation than young Greeks. Young Bulgarians do not have mountains of debt and will be free to decide their own priorities and will be capable of funding them," Rosen Plevneliev said in an interview for CNN. The president conceded that "Bulgaria is not perfect" as unemployment is running high, reaching 11.5%, while the economy is expanding at a rate of 0.51%. Yet he made it clear he firmly believes the country is on the right track. "The word "growth" is spelled all over the world and many politicians talk about it. My opinion is that growth can not be purchased. Growth can not be based on increasing mountains of debt at the cost of next generations. Growth can only be worked out with structural reforms and sustainable actions." Asked to elaborate on his approval for austerity measures, President Plevneliev said: "The right balance is never to forget that whatever you do, you have to spend what you have, not what you wish [to have]." In his words Bulgaria is not among the countries, which need first to find their feet on solid ground and then seek growth and sustainability. "We have been taking structural reforms, we have been working hard. As a regional development minister, I was not just a minister, I was a crisis manager. But we managed to achieve a very stable macroeconomic situation in Bulgaria and now we can talk about sustainable growth," Plevneliev told CNN. The Bulgarian economy's growth slowed to 0.5% on an annual basis in the first quarter of 2012 over falling exports. While the IMF recently projected gross domestic product growth of 0.8% in 2012 and 1.5% in 2013, the European Commission has sharply revised downwards its forecast for Bulgaria's economy, estimating it is to grow just 0.5% this year. Earlier this year Bulgarian analysts and institutions unanimously cut their growth forecast for 2012 to just below 1.5% instead of the previously forecast 2-3%, citing slumping exports and stagnant domestic demand. The central bank BNB estimated Bulgaria's economic growth to slow-down to 0.7% in 2012, citing the sovereign-debt crisis in the euro area. Bulgaria's economy expanded by 1.7% in 2011.

 

Bulgarian govt negotiates 75% of 2007-2013 EU funds as of end-April 2012

Minister responsible for the EU funds utilisation, Tomislav Donchev, said that some 75% of the EU funds under all the country’s operational programmes, which should be utilised in the period from 2007 through 2013, have been negotiated, a note on the government's website informs. In nominal terms, the value of the contracts has reached BGN 11.8bn (EUR 6.03bn). This is a significant improvement as compared to 2010 when only 27% of the funds were negotiated. Some 22%, or BGN 3.42bn of the total have been utilised as compared to BGN 1.5bn at the end of 2010, and BGN 400mn at the end of 2009. 

 

 

INVESTMENTS:

 

 

COMPANIES AND INDUSTRIES:

EBRD mulls financing 10MWp solar power plant construction in Bulgaria

The EBRD mulls providing an up to EUR 7mn long-term senior loan to SPV Dabovo Energii EOOD for the construction and operations of a 10MWp solar photovoltaic (PV) power plant located in central Bulgaria, the bank announced on its website. The total value of the project is EUR 16.5mn and it is expected to be co-financed with a commercial lender. The solar photovoltaic power plant aims to support Bulgaria in its transition to a low-carbon economy and will assist the country in diversifying its renewable energy generation, which is currently heavily focused on hydro power and wind power. 

 

Bulgaria to Produce 1.5 Tons of Rose Oil in 2012 - Expert

Bulgaria expects to produce a ton and a half of rose oil in 2012, according to Nedko Nedkov, director of the Institute of Roses and Essential Oil-Bearing Plants in the southeastern Bulgarian town of Kazanlak. In an interview for the Bulgarian Telegraph Agency (BTA), Nedkov specifies that Bulgaria's annual rose oil production is set to increase by 300 kg from 2011. Rose blossoms retain the high price from the beginning of the season, trading at BGN 2.20 – 2.30 per kg, as compared to a peak price of BGN 1.70 – 1.80 per kg in 2011. In Nedkov's words, rose pickers are paid BGN 0.60 per kilogram of rose blossoms, up by BGN 0.10 from 2011. The rose picking season started on May 24 and will end on June 15. Bulgaria has a total of 36 000 decares of rose gardens, 20 000 of which are located on the territory of the southeastern Stara Zagora district.

 

Bulgaria to Finalize Large-Scale E-Govt Project in 2013

The implementation of the largest e-government project in Bulgaria will enable electronic data exchange between over 30 public registers, according to Transport Minister Ivaylo Moskovski. Bulgaria's Minister of Transport, Information Technology and Communicationssigned Wednesday contracts with three contractors on the e-government project. Moskovski vowed that work on the project would start on Thursday. The total value of the project is BGN 18 M and the first results are expected in Sofia-based units. The e-government project is financed under the Administrative Capacity Operational Program and is to be wrapped up in 2013. In his Wednesday statement, Moskovski noted that Information Services AD, a public limited company majority owned by Bulgaria's Finance Ministry, would become a leading unit in the implementation of the e-government scheme. He added that Deputy Minister Valeri Borisov, who holds the Information Technology portfolio, would be included in the company's managing body.

 

Bulgarian PM Seals Arms Deal Worth BGN 150 M with Iraq

Bulgarian Prime Minister Boyko Borisov has negotiated a deal for the supply of 500 MT-LB armored vehicles to Iraq. The deal was sealed Thursday within the Hemus 2012 International Military Equipment Exhibition in the presence of Iraq's Acting Minister of Defense Sadun al-Dulaymi, according to reports of the Bulgarian Telegraph Agency (BTA). After opening the exhibition, Borisov specified that the MT-LBs had a price tag of EUR 300 000 each and expressed his satisfaction over the deal. He said that the MT-LB armored vehicles had been produced in Terem's plants in Targovishte and one MT-LB would shortly be sent to Iraq for tests. Borisov went on to say that a deal worth EUR 36 M for the supply of specialized equipment by Kintex Bulgaria to Algeria would soon be closed. "We expect another sale worth BGN 55 to be negotiated by the end of the day," Bulgaria's Prime Minister added. He further offered Liu Sheng, Deputy Director of the General Armaments Department of the Chinese People s Liberation Army, to buy short-range ammunition. Borisov joked that purchasing one bullet for each Chinese soldier would suffice. Bulgaria's Prime Minister urged all participating countries to buy Bulgarian weapons, stressing that no complaints had ever been received about their quality. He went on to congratulate Defence Minister Anyu Angelov for the excellent organization of the event.

 

5 Hydropower Plants to Be Built on Maritsa River in Bulgaria

Five hydropower plants (HPP) are to be built in four years' time in the lower parts of the riverbed of the Maritsa river between the southern Bulgarian towns of Parvomai and Lyubimets, Haskovo district. The investment amounts to EUR 115 M and the first HPP is to be launched in a year and a half, according to Viktor Sokachev, press secretary of PVB Bulgaria, which starts work on the implementation of the project. The plants will be equipped with the so-called pulp turbines, which will be used for the first time in Bulgaria and in Europe, according to reports of business news portal investor.bg. As regards environmentalists' concerns about the negative impact of run-of-river hydropower plants on the water, Sokachev says that samples are being taken on a daily basis to determine water quality. Energy efficiency will feature prominently on the agenda of the forthcoming International Economic Forum Maritsa, scheduled to take place on June 6 – 7 in the southern city of Plovdiv. The event is returning after a 3-year break for its fifth edition in 2012. The forum is organized by the Bulgaria Economic Forum and is expected to bring tgether around 250 participants, including James Hudson, Daniel Berg and Stefka Slavova, Members of the Board of Directors of the European Bank for Reconstruction and Development (EBRD). The forum will revolve around key topics like local policies for the development of the region related to the construction of industrial zones, tourism and municipal investment programs. There will also be discussions on the situation of key sectors of the economy like the food industry, metallurgy and metal processing, energy efficiency, the construction of hydropower plants, etc, according to Georgi Tabakov, Chair of the Bulgaria Economic Forum. In the course of the 2012 edition of the event, the Investor of the Year awards of the Plovdiv municipality will be bestowed. The nominees have been selected among a total of 30 000 companies operating in the region by the Territorial Office of Statistics in Plovdiv on the basis of objective criteria, according to Georgi Angelov, Chair of the Plovdiv-based unit.

 

Lukoil Starts Building USD 1.5 B Hydrocracking Plant in Bulgaria

The Lukoil Neftochim Refinery in Bulgaria's Burgas, a subsidiary of the Russian energy giant, and the Bulgarian government broke the ground of a USD 1,5 Bhydrocracking catalyst installation that will process petroleum waste. The construction phase of the project will create over 3 000 jobs, declared BurgasMayor Dimitar Nikolov during the ground-breaking ceremony, which was attended by Bulgarian Prime Minister Boyko Borisov, Deputy PM and Finance MinisterSimeon Djankov, and Lukoil President Vagit Alekpetrov. "Bulgarian subcontractors will be hired for some of the construction works," Lukoil chief Alekpetrov assured at the start of the construction that he launched together with Bulgarian Prime Minister Borisov. The USD 1.5 B investment in Bulgaria is 10% of Russia company Lukoil's global projected investments for the next 10 years. In January 2012, Lukoil Neftochim Burgas and Italian company Technip signed Wednesday a contract worth EUR 950 M for the construction of the hydrocrackingfacility in the Bulgarian Black Sea city of Burgas in the presence of Lukoil's First Vice President Vladimir Nekrasov, Lukoil Bulgaria CEO Valentin Zlatev, Bulgaria's Deputy PM and Finance Minister Simeon Djankov, and Burgas Mayor Dimitar Nikolov. The Lukoil Bulgaria hydrocracking plant will be the tenth in the world, and the largest one in Eastern Europe, with only nine similar facilities existing in the world, located in the USA, Mexico, Canada, Poland, Japan, and Kuwait. The Lukoil Neftochim refinery is to launch the hydrocracking facility in 37 months; the construction phase is to open 3 000 jobs in the Burgas region in construction, transport, logistics, and machine-building. Once completed, the new installation is going to reduce substantially the refinery's output of greenhouse gases, and will replace existing waste processing installations using older technology. Since January 2012, Bulgarian Finance Minister and Deputy PM Djankov has demonstrated support for Lukoil's investment plans in Bulgaria, regardless of the the Lukoil vs. Bulgarian Customs saga, which started in July 2011. Lukoil's tax warehouse operator permits for the Neftochim refinery and the Rosenets oil terminal were revoked by the Customs Agency on July 22 after it failed to observe the June 26, 2011 statutory deadline for the installation of electronic devices reporting incoming and outgoing volumes to the National Revenue Agency (NRA). On January 16, 2012, the Customs Agency said in a statement that the Lukoil Neftochim refinery had been awarded protocols certifying the compliance of its measuring equipment with the statutory requirements. Many have suspected that the 2011 conflict between the Bulgarian government ofPrime Minister Boyko Borisov and Lukoil Bulgaria was faked to boost support for Borisov. The Lukoil Neftochim Burgas refinery itself is the largest corporate taxpayer in Bulgaria and makes up 10% of the Bulgarian GDP.

 

Moscow Claims EUR 1,1 B as Compensation for Belene Project

Rosatom, Russian state nuclear energy corporation, will demand from Bulgaria 1,165 billion euro in compensation for dumping Belene nuke project. The sum covers the equipment ordered by Bulgaria’s National Electric Company, groundwork at the construction site carried out by Russian contractor Atomstroyexport, etc., a source close to the negotiators told The Standart. The sum is not finalized and may vary within narrow margins. The manufactured equipment includes two reactors, their cost accounts for the largest item in the balance sheet. The first reactor is almost ready and could be delivered to Bulgaria by end-year. As for the second one, the claims of the Bulgarian and the Russian negotiators differ – Sofia claims that it is 25 percent ready, while Russians maintain that the reactor is 80 percent ready. Bulgaria plans to sell the second reactor to a third party. 

 

Bulgaria expects increase in tourist numbers, revenue in 2012

Bulgaria's 2012 tourism revenues will exceed last year's and will reach BGN 3bn, as compared to around BGN 2.8bn in 2011, according to deputy economy minister Ivo Marinov. Some 5-8% more foreign tourists are expected this year, mainly due to higher number of tourists from Russia and Ukraine (up by 15-20%) Revenues generated by tourism sector companies in 2011/2012 winter season reached BGN 230mn (EUR 117.6mn), topping the results registered in the last two decades. 

 

Reported by:

Georgi Iliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea