Advice when you need it most
The last quarter of 2009 was the worst one for the Bulgarian economy. According to the National Statistics Institute Bulgaria’s GDP has fallen by 6.2% and it has been 17,858 billion levs (about 8. 5 oo billion Euros). The real annual drop for 2009 was of 5.1% in comparison with 2008. The official forecast of the Bulgarian government made in the autumn of 2009 was for a drop of 6,3% which later has been corrected to 4,9%.
The Bulgarian economy will continue sinking in 2010. The decrease of the GDP will be of 1%, according to the Agency for Economic Analysis and Forecasts. For 2009 the expectations are of a significant decrease of the GDP of 6.3%. Bulgaria will be in recession for two consecutive years. The decrease of the investments and the retail index will continue in 2010. The expenses in Bulgaria’s budget will not increase in order to avoid deficit. The major reason for this is the world wide recession. Although there have been signs for upcoming end to the recession in the USA, the risks for the world and the European economy are still there.
The slowing down of the economies of Bulgaria’s major trading partners has led to shrinking of Bulgaria’s export. The export of goods has decreased by 30,7% in the first five months of this year and it is expected that the decrease will be 10,5% on an annual basis. This has its effect on the transport and freight. As result the total volume of the export will shrink by 12,3%. The limited crediting and the slow increase of the personal incomes has led to a decrease in the investments and the sales in the country itself. The expectations are that in 2009 the spending of the average household will shrink by 4.5% and of the government by 3%.
In the following years the domestic demand, which has been generating mostly by the foreign investments, will be hard to resume the growth of the Bulgarian economy to the levels of the last years. That is why the recuperation of the economy is expected to materialise through the export. Having in mind the current world wide tendencies, this will not happen in 2010. To the contrary, the export will continue decreasing and the expectations are that it will shrink by 3,8% next year. That is why the forecast is for economic decrease of 1% in 2010. This will be accompanied by relatively low inflation about 2,2%.
The average decrease of property prices in Bulgaria is by 23% in the first six months of 2009. There are areas of the country and especially cities where due to overpricing, now the decrease is exceeds 30%. The expectations of analysts are that by the end of the year prices will decrease further by 5% to 15%.
The most significant price decrease in the capital Sofia where the prices of newly built developments in the area of Obelya have dropped by more than 40%. The lowest price drop is in Student Town – by only 10%. In the affluent Lozenets and Iztok where the price exceeded 2000 Euros/sq m in 2008, now there is a decrease by 1/3. The decrease is similar in Liulin and Ovcha Kupel. In the down-market Banishora the lowest price of newly built apartments is 390 Euros/ sq m. The lowest prices are in the southern and the eastern parts of the city because there many apartments have been bought off-plan as investment and now they have been completed and put on the market.
In the first half of this year buyers preferred mostly one-bedroom apartments not exceeding 50 000 Euros per sq m. In the last month two of every ten buyers have purchased in the end a bigger and more expensive apartment than planned in the beginning due to the lower prices. The number of owners who sell their property to buy a bigger one has increased, as the difference in the price is lower than ever.
In most cases buyers used their savings for the purchase of a property, while 44% of them have taken small mortgages or even consumer loans. 32% of the buyers who took mortgages have problems repaying them regularly but only 17% of them cannot repay their mortgage at all.
Village houses with big yards sell even under their value around Veliko Turnovo, Pernik, Sliven, Haskovo and Yambol, as owners just want to get rid of them. In smaller towns the purchase of property is rarely for the purpose of investment but mainly it is in case of change of the marital status and the recession is felt stronger on the property market. Unemployment is growing faster and first time buyers are very cautious.
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
U.S. energy company 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.
In 2003, Italian utility 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.
Germany’s copper producer 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.
China’s largest sport utility vehicle maker, Great Wall Motor Co, 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.
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 ALBK.I bought 49.99 percent of specialist business lender Bulgarian-American Credit Bank (BACB)
for 216 million euros in 2008.
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 earlier this year. Continue reading »
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.