STRUMA HIGHWAY DELAYED
The construction of Struma Highway will cost about 1 billion Euros and its completion has been planned for 2020. Initially, the 160 km long highway connection between Sofia and Thessaloniki had to be completed in 2004. Until recently it was considered that the project would cost 600 million Euros and this amount has been provided to Bulgaria from the cohesion fund of the EU. However, the Ministry of Environment and Water has calculated that in order to secure the necessary protection of the rare species of animals who live along the Struma river, another 200 million Euros will be required. As result the Council of Ministers has included the final completion of the Struma Highway in the financial plans for 2020. When the highway will be completed it will take only one and a half hours to take the distance from Sofia to Thessaloniki.
MORE CREDITS
The Bulgarian banks have lent a record number of loans to businesses from April to July. This level of lending, amounting of 3,2 billion levs, have surprised the experts as it takes place in the midst of a world economic recession. The greatest number of loans to the value of 975 million levs, have been given to traders, while at the same time, there is a decrease in the number of the loans for construction projects and for tourism. Even if the lending decreases in the remaining months of the year, still it will exceed last year’s levels, the experts say.
SUNNY BEACH - 30 000 APARTMENTS
The construction boom on the southern Bulgarian Black Sea coast started six years ago. Now, some of the resorts look like town ghettos rather than places to relax. The investors have not taken seriously into account the forecasts of the market researching companies which warned about the slump and as result the supply has exceeded the demand in the last two years. Now the investors can not sell their developments and the prices have dropped by 50% in comparison to the last year. It is difficult to say how many apartments are unsold in Sunny Beach but experts claim that their number has reached as many as 30 000. In 90% of the cases the developers have taken mortgages for the construction of these properties and it is unclear how they will repay them.
Some experts claim that in order to solve the problems at the Black Sea resorts all hotels within 100 metres from the seashore must be demolished and the land transformed into parks, just like in Spain.
PROPERTY MARKET SLOWS DOWN
The number of planning permissions issued in the first half of the year have decreased by 6%. 4300 new buildings with total area of 2,8 million square metres have been approved for construction, 62% of them are new apartments. The number of the new office spaces have stayed the same, while there has been a sharp decrease in the number of all other types of buildings.
The highest number of planning permissions have been issued in Sofia, Plovdiv is in the second place, while Varna is in the third. Plovdiv heads the list with the highest number of planning permissions for new office buildings.
OLAF’ S DIRECTOR IN BULGARIA
During his visit to Sofia OLAF’s Director Franz-Hermann Bruner said that Bulgaria must deal with the corruption within the next few months. In his meeting with PM Stanishev, Bruner expressed his hope that the judicial system will see dynamic improvement and that there will be concrete results in the fight with corruption.
AGRICULTURAL EXPORTS
The export of Bulgarian agricultural goods has increased by 11% in 2006 in comparison with 2005 according to the report of the Bulgarian Agricultural Ministry. The value of the production has reached 7,1 billion levs.
FOREIGN INVESTMENT
Foreign investment in Bulgaria exceeds 25 billions Euros for the last 12 years. The worst year was 1996 when the foreign investment barely reached 137 million Euros, while in 2007 it exceeded 6 billion Euros, according to the Bulgarian National Bank. Since 2002 there is a tendency of interrupted increase of the level of the annual foreign investment in the country. In 2003 and in 2006 the increase has been 90%. Only in the last two years the direct investment has reached 12 billions Euros.
THE PARTY IS NEARLY OVER
From The Economist
After a good run, Eastern Europe faces an economic slowdown
IT HAS gone on splendidly for years, and the party isn’t quite finished yet. For a decade or more eastern Europe has benefited from exceptional (and mostly unforeseen) good fortune. Economic and political stability, including for ten countries membership of the European Union, has boosted investors’ confidence and cut borrowing costs. A big pool of cheap and diligent workers, along with the unleashing of entrepreneurial talents, has produced thriving new private businesses. In most countries, growth rates have been stellar (see chart).
Inevitably, it could not last. Wage costs are creeping up. Labour shortages are biting. Out-of-date infrastructure, such as Poland’s notorious roads, is clogging trade. In several countries inflation is rising. And world markets, both for raising capital and for exporting, are looking tougher. In the face of all this, growth this year has been surprisingly strong. That is partly because the euro-area slowdown has only just started; partly because domestic demand has been rising; and partly because intra-east European trade has started to make up for softer exports westwards.
The big exceptions are the Baltic countries of Estonia and Latvia, home to colossal current-account deficits and breakneck growth in recent years. Now their bubbles have popped. In Latvia, for example, retail sales fell in June by 8.3% on a year earlier; industrial production is down by 6.4%. The construction industry has imploded. Inflation remains high at a whopping 17%. For a country with a pegged currency, that is scary. Yet the gloomiest predictions have so far proved unfounded. For example, Latvia has not been forced to devalue. The foreign banks, mainly Swedish, that own most of the financial system seem largely untouched by the credit crunch elsewhere in the world. And there is no sign of the contagion spreading from the troubled (but tiny) economies of the Baltic to the rest of the region.
In the biggest economy, Poland, things look better. Growth in the first quarter of 2008 was a sprightly 6.1% on a year earlier. Many Poles who left to work in Britain and Ireland are coming home, tempted by higher wages. Unemployment, which was 20% in 2003, has all but vanished in most parts of the country. But growth is now likely to slow, particularly if interest rates keep rising: they were 4% in 2007 and are 6% now, with another rise likely. That will strengthen the zloty further; it has risen against the euro. That may be a reason why Poles are returning from Britain, but it hurts Polish exporters.
Critics say the government should now do more to reform public finances, especially pensions, and get big infrastructure projects going, before a contraction in the labour force kicks in during the next decade. That would also improve the country’s chances of joining the euro, which it now seems unlikely to do before 2013. So far, Slovenia has adopted the single currency and Slovakia will do so next year. No other country looks close.
The biggest worry is Hungary, which is the country most dependent on the continuing confidence of the capital markets. A shaky government has done surprisingly well in restoring macroeconomic stability after the near-disastrous spending and borrowing splurge in the early years of this decade. The budget deficit reached a yawning 9.4% of GDP in 2006; Neil Shearing of Capital Economics, a consultancy, reckons it may be down to as little as 3.5% by the end of 2008.
This has come at a heavy price, both in the government’s rising unpopularity and in a near economic standstill last year. The economy has picked up a bit since then, but inflation remains troubling at over 6%. The question is whether the government has the stomach for another round of fiscal tightening. Public spending is still over 50% of GDP, the highest in the region. A further worry is the looming slowdown in the richer half of the continent. The Hungarian economy depends heavily on exports to western Europe, which account for nearly 40% of GDP.
Despite the EU’s worries about corruption and organised crime in its newest (and poorest) members, Romania and Bulgaria, their economies have been growing fast at around 7-8% a year. They are now leading candidates for a hard landing. A property bubble in Bulgaria seems to be on the verge of bursting, though this has still to filter through to the rest of the economy. Yet for now, few seem worried. Having dodged sanctions from Brussels (not fully in the case of Bulgaria), politicians in the Balkans seem to think that defying the laws of economic gravity is a cinch.
COLLECTING FINES
The Bulgarian traffic police has successfully increased the collection of traffic fines 8 times. Only until recently the total amount of the collected fines was 5 million levs (2,5 million Euros) per annum, while at the moments it is 4 million levs ( 2 million Euros) per month. The problem with foreigners driving through Bulgaria remains. At the moment they have to pay their fines through the banks and if they are fined after 5 p.m. or during the weekend they leave the country without paying. To counter act the traffic police will introduce new fine certificates both in English and in Bulgarian be the end of the year and the foreigners will have to pay on the spot.
NEW SANCTIONS EXPECTED
A Bulgarian ecological organization informed the European Commission about scandalous swaps of property as result of which the energy boss Christo Kovachky has acquired s formerly state owned forests in Rila Mountain at prices 24 times lower than the market prices. These forests have been included in the regulation plan of the new ski resort Iskrovete-Govedartsy-Maliovitsa. The administraste of the State Agency for the Forests have accepted that the Rila forests should sell to Kovachky for 5 levs (2.50 Euros) per square metre, while at the same time the market price is 120 levs (60 Euros) per square metre. According to the ecologies, the agency has not protected the interest of the state and has not adhered to several EU directives by not making the necessary evaluation of the plans for the new ski resort and its suitability. The new ski slopes and lifts will cut deeply in the National Park Rila. Brussels has launched sanctions procedure against Bulgaria for illegal construction in the national park.