Major foreign investments in Bulgaria
Reuters Bulgaria has attracted 24 billion euros in foreign direct investment since 2005, when the Socialist-led government came to power, but the global crisis has hit the flows and put an end to the credit-fueled economic boom.
Economists say Bulgaria is now paying the price for not using the boom to boost productivity and encourage exports. Here are capital flows went and some major investments since 2005: (in million euros)
2005 2006 2007 2008 2005-08 REAL ESTATE DEALS 533.8 1,778.0 2,505.1 1,900.3 6,717.2 FINANCIAL SERVICES 667.3 799.4 2,112.5 1,485.9 5,065.1 PROCESSING INDUSTRY 868.2 1,064.7 906.2 810.9 3,650.0 RETAIL 576.9 964.5 1,237.4 796.9 3,575.7 CONSTRUCTION 171.6 501.0 797.4 465.0 1,935.0 ENERGY 308.5 352.4 332.5 176.2 1,169.6
AES
U.S. energy company AES Corp. (AES.N) in 2006 launched
construction of a $1.4 billion coal-fired power plant, the
largest investment in Bulgaria since the fall of communism in
1989.AES is also building a 270 million euro wind park.
ENEL
In 2003, Italian utility Enel (ENEI.MI) started a 700
million overhaul of Bulgaria's thermal power plant Maritsa East
Three, which was completed earlier this year.
Enel holds a 73 percent stake in the coal-fired plant.
AURUBIS
Germany's copper producer Aurubis (NAFG.DE) has invested 80
million euros since 2006 in its plant in the town of Pirdop, the
second biggest in the group.
The smelter was initially owned by Belgium's Cumerio which was taken over by Norddeutsche Affinerie in 2008. The new group then changed its name to Aurubis to reflect the expansion.
GREAT WALL
China's largest sport utility vehicle maker, Great Wall
Motor Co (2333.HK), has started building an 80 million euro car
plant in a joint venture with Bulgaria's Litex.
Litex said investment in the project, which will employ some 1,300 people, would reach a total of 300 million euros at a later stage.
KBC
In 2007, Belgian banking and insurance group KBC (KBC.BR)
acquired 75 percent of Bulgaria's EIBank, ninth-largest bank in
terms of assets in the country at the time, in a 295 million
euro deal.
ALLIED IRISH BANKS
Allied Irish Banks (ALBK.I) bought 49.99 percent of
specialist business lender Bulgarian-American Credit Bank (BACB)
for 216 million euros in 2008.
OMAN FUND
The Oman State General Reserve Fund, which is one of the key investment institutions of the government of the Sultan of Oman, paid 185.4 million levs for a 30 percent stake in Bulgaria's Corporate Commercial Bank CORP.BB earlier this year.
The Bulgarian Banking System
59.8 billion levs have been held in Bulgarian banks in May 2009 which is a decrease by 437 levs, according to the Bulgarian National Bank (BNB). This is the second most serious decrease of the amount of money in the Bulgarian banks since the beginning of the year. This is mainly due to the fact that the amounts which foreign banks and other foreign credit institutions keep in Bulgaria have decreased by 390 million levs in May 2009. Despite this the amount which they keep here is not small - 15.4 billion levs.
In comparison personal savings total 22.8 billion levs and the total of the funds of companies in Bulgarian banks is 19 billion levs. The personal savings have decreased by 100 million levs despite the attracting interest rates of savings. The total amount of the money in companies’ accounts has slightly increased.
From January 2009 the level of the money in the accounts held at the Bulgarian banks tend to fluctuate both ways on almost permanent basis. The most significant withdrawals took place in January and in May. In January about 800 million levs have been withdrawn, 500 million levs of them were withdrawn by foreign banks. The Bulgarian companies withdrew 600 million levs but personal savings increased by 340 million levs.
The personal accounts have a positive balance while the companys’ accounts are in the red. In May individuals held 22.8 billion levs in their accounts while they had credits amassing to 17.7 billion levs. The companies at the same time held 19 billion levs into their accounts but they owe the banks 32 billion levs. On the whole the Bulgarian banking system is one of the few in the EU which is profitable. Its profit in the end of May 2009 was 402 billion levs. The liquidity index is 20.6% which means that 20% of the attracted funds in the banks can be immediately paid in cash if requested.
Office Rentals
Office rent in Sofia has decreased in comparison to the end of last year and at the moment is between 10 and 15 Euros/sq m. The decrease is due to mainly two reasons. Firstly, the economic recession and secondly, the highest number of new offices for rent, both because of the high number of newly completed office buildings and the bankruptcy of companies which leave their offices.
The office rental market follows the economic situation in Bulgaria. However, according to analysts, the future tendencies will depend to a great extend on the investors. An investor who has already rented 60% of the building before its completion is less likely to accept lower rent than the investor with an empty building. Additionally, it is important how many projects an investor has and whether they are profitable. Last but not least, offices with good location and effective use of the space, with enough of parking space and with access to the necessary technology are unlikely to rent for less.
Ex-pats
The ex-pats who have moved to the Bulgarian Black Sea coast are selling their properties and leaving Bulgaria in great numbers. They have lost their hope to make a profit by renting their apartments. They offer their properties for sale at prices which are 20% lower than in the last year. Studios are for sale for as little as 38 000 Euros and two-bedroom apartments are on offer for about 60 000 Euros. The second-hand car markets are full of British cars which sell at half the price of the ones with a left steering wheel. Many of the Brit who have settled in Bulgaria are pensioners and some of them find it hard to cope during the recession and sell their apartments, houses and cars.
Bulgarian Property Market - Overview
The direct foreign investment in construction and in properties in Bulgaria in the first quarter of 2009 was 208 million Euros which is a decrease by 59.3% in comparison to 2008 whe it was 511.2 million Euros.
In the first half of 2009 the prices of properties for sale in the country have decreased by 5.95% on average while the rents have decreased by 6.59%, according to the official statistic. From December to May the prices of properties have fallen by 10% in Sofia, by 6.13% in Varna and by 10.25% in Burgas. The most insignificant price drop was in Blagoevgrad - 0.67%.
Most of the deals, however, were at 20% lower prices than the advertised prices. The number of purchases from January to March 2009 was 35 433 which is by 37.27% less than in the same period of 2008 when there were 56 483 purchases. Some analysts expect the number of the purchases to fall by 50% on annual bassis.
In this year due to the limited mortgage lending 70% of the sales were financed by personal savings while in 2008 not less than 80% of the properties were purchases with mortgages.
