불가리아 주요 경제뉴스 (13– 20 July 2012)

BULGARIAN ECONOMIC TOP NEWS DIGESTWEEKLY REPORT(13– 20 July 2012)

 

Sections/headline briefs:

 

MACROECONOMY:

Fitch Affirms Bulgaria at BBB-, Stable Outlook

Bulgaria takes proper economic and financial steps - EBRD President

Bulgaria's unemployment rate falls to 10.8% at end-June 2012

 

 

INVESTMENTS:

Net FDI in Bulgaria turns positive in May, up by EUR 392mn y/y in Jan-May

 

COMPANIES AND INDUSTRIES:

New passenger car registrations in Bulgaria up 6.6% y/y in H1

Bulgarian telecom BTC posts 43% y/y rise in net profit in H1

Northeastern Bulgarian City Faces 2 Plant Closures

Bulgaria Tops Lavender Oil Production Ranking

Bulgarian 2011 arms exports fall

Privatisation agency fails to sell cargo unit of Bulgarian BDZ

Beer sales in Bulgaria remain below pre-crisis levels this year

 

 

 

 

 

 

 

 

 

 

 

 

Articles:

 

MACROECONOMY

Fitch Affirms Bulgaria at BBB-, Stable Outlook

Fitch rating agency has affirmed Bulgaria's Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-', and its Long-term local currency IDR at 'BBB'. The outlook on both ratings is stable. Fitch has simultaneously affirmed Bulgaria's Short-term rating at 'F3' and Country Ceiling at 'BBB+'. The affirmation reflects Bulgaria's successful fiscal consolidation and stable monetary policy and the rebalancing of the economy. However, growth remains weak by 'BBB' range standards, and the risk of contagion from any intensification of the eurozone crisis through trade and financial channels remains material, forestalling any upward momentum in the ratings at present. Fitch expects Bulgaria's GDP to grow by 0.9% in 2012. Fitch projects this will be driven by domestic demand, with increased EU funds absorption boosting public and private sector investment, and be less reliant on exports as the eurozone crisis continues. Under Fitch's baseline scenario that Greece does not leave the eurozone, the agency expects Bulgaria's GDP to grow by 1.9% and 2.5% in 2013 and 2014, respectively. Bulgaria is particularly exposed to the continuing eurozone crisis through the financial channel, due to the significant (21% of total assets), albeit declining, role of subsidiaries owned by Greek parent banks in the Bulgarian banking sector. In the event of a disorderly eurozone exit by Greece, the ability of Greek parent banks to maintain support for foreign subsidiaries may be severely compromised, leading to a possible rise in contingent liabilities for the sovereign. Combined with declining asset quality in the system more broadly (non-performing loans were 17% of the total in May 2012 and have yet to peak) there could be pressures on profits, capital and liquidity levels. Against this, the Bulgarian banking system has accumulated substantial buffers, including capital in excess of the regulatory minimum, of BGN 2.9 B (USD1.8bn, 4% of GDP) in March 2012. Fitch expects the 2012 fiscal budget deficit target of 1.6% of GDP (ESA 95 basis) to be achievable, mainly due to a track record of successful control of expenditure. Fiscal reserve levels fell to around 6% of GDP at end-May 2012, although the reserve will receive a boost following the issuance in July of EUR1bn five-year Eurobonds. The fiscal reserve was drawn down from an admittedly high level of 12% of GDP in 2008 for deficit financing purposes, although Fitch notes that the Bulgarian sovereign retains the ability to access markets. Hence the agency does not view the decline in reserves as a stress indicator that in itself puts further negative pressure on the ratings at their current level. Nonetheless, the decline in fiscal reserves has reduced fiscal buffers, which a small, open economy like Bulgaria with its currency board arrangement needs in order to counteract external shocks, the agency said.

 

Bulgaria takes proper economic and financial steps - EBRD President

EBRD President Sir Suma Chakrabarti, who visited Bulgaria on July 17 and 18, evaluated positively the government's fiscal measures and said that the country takes proper economic and financial steps, the finance ministry reported. Compared to a number of countries in the EU, Bulgaria has low deficit and inflation rate and positive credit profile as indicated by the successful Eurobond issue in July. EBRD President held meetings with Bulgarian officials including the President, PM and finance minister. He has also met a number of EBRD clients and visited some of the sites in which the EBRD has recently invested, including, in Sofia, Call Point New Europe, a business processes outsourcing company in which the Bank acquired a stake last year. 

 

Bulgaria's unemployment rate falls to 10.8% at end-June 2012

The unemployment rate, measured in terms of registrations with the state labour agency, edged down to 10.8% in June from 11% in May, the institution informs in a note on its website. When compared to the year-ago period, the rate has increased by 1.2pps. In June, the number of the unemployed registered a third consecutive monthly drop since Sep 2011 and fell by 1.5% m/m to 354,825. In annual terms the number however increased by 11.5% - a higher growth than 9.6% y/y and 8.6% y/y in May and April, respectively. The manufacturing sector accounted for the largest share of newly-registered unemployed during the month, followed by trade and hotels and restaurants. Deputy labour minister Zornitsa Rusinova said last week that the rate of decrease in unemployment is very slow despite the start of the active tourist season and the expectations for seasonal boost of employment. The labour ministry will however seek to keep the unemployment rate below 11.5% this year through programmes stimulating mainly youth employment. 

 

 

 

INVESTMENTS:

Net FDI in Bulgaria turns positive in May, up by EUR 392mn y/y in Jan-May

Net FDI flows in Bulgaria turned to EUR 19.7mn surplus in May after ending April with EUR 84.3mn deficit, according to preliminary data of the central bank. Net investment in the country registers strong improvement as compared to the same month previous year when the account posted a tiny surplus of EUR 1.2mn. In Jan-May, the net flows to the country are also way above their year-ago levels - EUR 407.9mn as compared to just EUR 15.5mn. Equity capital invested in the country's non-banking sector by foreigners rose by 70% y/y to EUR 346.7mn on Jan-May. Equity capital invested in real estate properties continued to grow - it surged by 35.3% y/y to EUR 98.1mn in Jan-May 2012 and constituted 28.3% of the overall FDI inflows to the country (though still much lower compared to the pre-crisis level). Reinvested earnings dropped by 43% y/y to EUR 22.5mn in Jan-May. The other capital account, which shows net change in intra-company loans, showed inflows of EUR 104.7mn in Jan-May against outflows of EUR 171.8mn a year earlier, implying an increase of net foreign liabilities of local companies to foreign parents. The largest direct investments in Bulgaria came from the Netherlands (EUR 394.7mn) and Switzerland (EUR 105.5mn) in Jan-May. 

 

 

COMPANIES AND INDUSTRIES:

New passenger car registrations in Bulgaria up 6.6% y/y in H1

New passenger car registrations in Bulgaria increased by 6.6 y/y to 9,770 units in H1, the European Automobile Manufacturers’ Association said. At the same time, the number of the newly registered vehicles in all the EU 27 countries declined by 6.8% y/y to 6,644,829 units. In June alone, new passenger car registrations in Bulgaria surged 17.1% y/y to 2,135, compared to 2.8% annual decrease in EU-27. In 2011, the number of sold vehicles fell by 22.3% to 19,136. 

 

Bulgarian telecom BTC posts 43% y/y rise in net profit in H1

The consolidated net profit of the Bulgarian telecom services provider BTC, trading as Vivacom, rose by 43.4% y/y to BGN 27.26mn (EUR 14.1mn) in H1 2012, BTC announced in a stock exchange filing. The surge in net profit was triggered by increased revenue from mobile, TV and converged services, the company said. Total revenues went up by 4.9% to BGN 450.3mn and revenues from mobile services increased by over 15% to BGN 198.4mn. Gross profit from the mobile segment increased by 20.8% to BGN 133mn in H1 and partly compensated the 11.3% annual drop in gross profit from fixed lines. BTC assets totalled BGN 1.59bn as of the end of June, down from BGN 1.66mn a year earlier. In 2011, the consolidated net profit of BTC declined by 92.7% y/y to BGN 8.4mn due to discontinued operations, reduction of the revenues from fixed line services and lower retail prices. 

 

Northeastern Bulgarian City Faces 2 Plant Closures

Two plants of crucial importance for the economy of the northeastern Bulgarian city of Targovishte are shutting down. LVK Vinprom, a leading Bulgarian producer of high quality wines and high-alcoholic drinks, has shut down due to a suspended license. According to Ana Solarova from the press center of Bulgaria's Customs Agency, LVK Vinprom's license was suspended on July 3 over systemic excise dutyviolations. In Solarova's words the available quantities at the winery are being examined and once the irregularities are remedied, the license may be restored. The plant closure leaves 300 people unemployed, the majority of them narrow specialists in winemaking. In the autumn of 2011, a plant producing non-alcoholic beverages of the Coca Cola brand was closed. According to a statement of the company, the plant stopped operating as part of a plan to consolidate production infrastructure, thereby boosting efficiency and optimizing costs. The company said that it had shifted production volumes from its unit inTargovishte to the one in Kostinbrod. The firm vowed to offer 30 permanent and over 32 seasonal jobs at the Kostinbrodplant and a number of other units of the company, adding that the workers who would lose their jobs would be paid higher compensations that the ones provided by law. The company explained the plans to restructure its production infrastructure with the decreasing purchasing power of the population and the overall decline on the market of non-alcoholic beverages in Bulgaria in the past three years. The two plant closures in Targovishte will result in 600 layoffs. The city will depend on two plants to keep its economy going - a plant for car batteries and one for flat glass.

 

Bulgaria Tops Lavender Oil Production Ranking

Bulgaria has outpaced France by lavender oil production, according to reports of Bulgarian producers. Thousands of workers are now harvesting the small lavender blossoms in Bulgaria'sRose Valley amid scorching heat. The lavender blossoms are crushed under the workers' feet and undergo distillation within 24 hours of harvesting, Bulgarian private TV station bTV informs. According to Ivan Chikov, lavender oil producer, Bulgaria fully deserves its first place in the ranking as a major lavender oil exporter on a global scale. Chikov pooled efforts with three other people to set up a cooperative in the southern Bulgarian village of Kliment, Karlovo district and in 2003 the organization produced the first quantities of organic lavender oil in the country. "Demand is quite high for Bulgarian lavender oil, it has a more interesting scent, a richer aroma, while French lavender oil has a more delicate base," Chikov explains. Bulgarian lavender oil is used in the perfume and cosmetics industry and also in medicine The harvesting of lavender in the Karlovo region finished at the end of last week and the blossoms have already undergone distillation. In 2012, lavender oil trades at the record high of EUR 100 per kg. A land plot of 1000 square meters of lavender brings a profit of BGN 500 – 1500, which is why an increasing number of Bulgarians from different parts of the country are opening lavender fields. "There has been a persistent upward trend in prices of lavender oil. The tariffs trebled in the past three or four years," says Filip Lisicharov, owner of a distillery. Lisicharov argues that the decreased lavender oil production of France, the traditional leader in the sphere, allowed Bulgaria to climb to first place in the ranking. The biggest buyers of lavender oil are France, Germany, Switzerland and the US.

Bulgarian 2011 arms exports fall

Bulgaria exported some 231 million euros ($283 million) of arms and dual-use items and technology in 2011, down from 259 million euros in 2010, the government said Wednesday. Most of the 406 permits for arms export and transfer last year were issued for Afghanistan, Egypt, India and the United States, the government press office said in a statement.
Bulgaria had a huge armaments industry during communism, employing 115,000 people and shipping abroad an annual $700 to 800 million worth of armaments -- at prices from then. But the advent of democracy, the disbanding of the Warsaw Pact and a number of international arms sales embargoes to countries in Africa and the Arab world plunged the industry into a deep crisis in the 1990s. The majority of the production facilities have since been privatised with the government recently launching procedures to sell off the last remaining fully state-owned defence giant, VMZ Sopot.

 

Privatisation agency fails to sell cargo unit of Bulgarian BDZ

Latest government's attempt to privatise the cargo unit of Bulgarian state-owned railway operator BDZ was unsuccessful as the privatisation agency cancelled the procedure due to lack of serious investor interest. Although a total of six investors purchased documents for participation in the tender, including Romanian S.C. Grup Feroviar Roman S.A. and Czech AWT, only Duet Railway Bulgaria remained in the running as it was the sole investor that filed the relevant classified information clearance documents. The privatisation agency has therefore concluded that it cannot perform a competitive procedure for the sale of the unit. The agency will analyse the results and will after that launch a new privatisation procedure. 

 

Beer sales in Bulgaria remain below pre-crisis levels this year

Negative effects of the economic crisis in the beer sector continue as sales reached 1,840,000 hl in the first five months of 2012, below the 2007 and 2008 levels, BTA comments, quoting data by the Union of Brewers in Bulgaria. An increasing demand for beer-based mixed drinks, also known as Radler, has been recorded during the year. At the same time, the trend to purchase beer from stores, rather than restaurants and bars, remains. The sector employs over 2,400 persons and consists of eleven companies, six of which have a status of small independent breweries with an annual production below 200,000 hl. In 2011, Bulgaria ranked 14th among EU countries in terms of beer sales. Beer consumption in the country was 69 litres per person and sales reached 5,100,000 hl.

 

Reported by:

GeorgiIliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea