LM Legal Services Blog

Despite the financial and economic crisis, the market of agricultural land will stay relatively active in 2009 but the prices will fall, according to the Bulgarian Deputy Agricultural Minister Svetla Bachvarova. In her annual analysis of the agricultural land market she said that there has been an increase of more than 21% of the market in comparison with 2007. The average price of the deals in the last year has been 312 levs per 1000 sq m, according to the System for Agricultural Market Information. This is an increase of almost 33% of the market values in comparison with 2008. The prediction for this year is that they will fall to 280-300 levs per 1000 sq m. The differences in the prices for the different regions of the country remain. The lowest prices are in the area of Lovech and Pernik, relatively 201 lv per 1000 sq m and 140 lv per 1000 sq m. The highest prices are in Dobrich – 546 levs per 1000 sq m.
In 2008 for the second consecutive year the highest number of purchases of land took place in the Northern Central area.
There is a decrease in the renting of agricultural land. This was due to the fact that in 2008 and 2007 a larger part of the tenants have signed long-term contracts for more than four years with the land owners.
The regulation of agricultural land has decreased in the last year by 20% in comparison with 2007. The reason is the decreased interest for investment in tourism.
In 2009 it is expected that the area of the land for growing agricultural production will stay the same and only the land used for growing wheat will increase by 10%.

Although banks’ interest rates of savings accounts are still high, in February those of one- and three-month deposits started decreasing. At the same time the interest rates for six- and twelve-month fix term saving deposits are still increasing.

UniCredit Bulbank did not continue with their promotions and decreased the interest rate of the fourth period of their Increasing Interest scheme from 12% to 9% for the deposits in levs and from 10% to 7% for the deposits in Euros. The interest for their one year fix term deposit has dropped from 8.80% to 4.85%.

First Investment Bank did not continue their promotion Golden Deposit. The bank has launched their product March Deposit, a three month fix term deposit with interest rate, both for deposits in Euros and in levs, of 8.75% instead of 9.75% like the previous promotion.

Most other banks still keep increasing the interests of savings accounts in order to attract fresh money. Among them are: PostBank, Raiffeisenbank, Eibank, Invest Bank and Alpha Bank.

Concerning customer loans, all banks have increased their interest rates by about 1% in February, apart from Alpha Bank who decreased it by 0.7%.

Most of the mortgage rates have not increased and in the rare cases of an increase, it does not exceed 1%.

The Bulgarian economy has been affected by the world recession. The growth of Bulgaria’s GDP in the last quarter of 2008 was just 3.6%, according to the National Statistics Institute. This is an almost two fold slowing down – in the previous quarters the GDP’s growth was between 6.8% and 7.1%.

After Bulgaria moved out of the hyperinflation and the recession during the rule of the government of Zhan Videnov (1996-1997), the economy’s growth has never been so small, except once, nine years ago, in the last quarter of 1999 when the GDP grew by 3,5%. Since then the Bulgarian economy has been growing steadily and the annual growth in the last six years was never under 4%.

The Bulgarian industry has suffered the hardest blow. In the last quarter of 2008 it has had a negative growth of -0.1%. The export has decreased by 6,8% in October-December 2008. At the same time the import has shrunk by 3.7%. The growth of the GDP, although rather small, is due to the growth of the agricultural production of 20.6%. The reason for this is mainly the good harvest.

For the whole of 2008, the GDP’s growth was 6% which was due to the active economic growth in the first nine months of the year. Bulgaria’s GDP for 2008 was 66 billion levs.

The index of the producer prices for May 2008 showed an increase by 12.9% since May 2007, according to the National Statistics Institute.  For the same period the increase of the prices of consumer goods is 9.4% and of the investment products is 5.4%, while the highest increase is the one of energy – 24.8%. The inflation of the production on the domestic market is 13.6%, while on the international market it is 11.6%. According to the analysts, this comes to show that the market in Bulgaria is still not completely free, as local producers offer their production at competitive low prices abroad, while at the same they can compensate this by increasing their profit in Bulgaria.