With its term expiring in less than a year, the Bulgarian government decided to spend BGN 5.19 billon in 2009 in an attempt to cushion the impact of the global financial crisis, shows the draft budget report obtained by Dnevnik.

Public investment spending will swell by BGN 900 million from last year and will be backed by an extra investment programe of up to BGN 1 billion sourced up to BGN 400 million by the fiscal stability reserve and up to BGN 700 million from the planned budget surplus. The surplus is seen at 3% of GDP but reserve investments are set to chop off a percentage.

Deputy Prime Minister Ivailo Kalfin and Finance Minister Plamen Oresharski told Capital weekly’s third annual meeting of the business and the government that the Cabinet is intent on building industrial parks and hydro plants to jump-start economic activity.

Market Flexibility, one of three rescue packages outlined in the draft, will aim to encourage lending to small and medium companies by boosting the capital of Bulgarian Development Bank. Up to BGN 50 million will be sunk into the local government fund FLAG to help municipalities handle EU funds.

The second package will promote employment and hiring, and the third, which is focused on fiscal policy, sees a budget surplus of 3% of GDP and redistributing 40% of the GDP from the budget.

World Bank Vice-Presidenr Kristalina Georgieva said at the meeting that Bulgaria’s financial system is stable, but advised governors to be ready for the worst and consider help from the IMF.

This is undoubtedly the deepest and the most complicated crisis Eastern Europe has seen since the fall of communism, and anyone trying to tell its end is acting irresponsibly. Almost all countries in the region have hard times ahead, which will question people’s faith in the use of painful structural reforms, EBRD President Thomas Mirow told Reuters on Tuesday.

(Dnevnik)

Bulgarian resort operator Albena AD has put up for sale its upscale holiday complex in Byalata Laguna area, on Bulgaria’s northern Black Sea coast.

The project is up for grabs for EUR 42.5 million, and comprises two units of 177 flats, a spa centre with an indoor and an outdoor swimming pool, a beach, a tennis court, a restaurant, a sweet shop, a supermarket and a parking lot.

Albena unveiled in June plans to build on the 2.2 hectares land plot after failing to sell it. The complex should be finished by the end of 2010 at a cost to the tune of EUR 17 million.

The resort operator has also put up for sale its Balchik Gardens project due to sprout in the coastal town of the same name. The investor is asking for EUR 8 million, VAT excluded, for ten buildings of up to five floors with a total floor space of 22,600 sq m and retail outlets. The company is putting the finishing touches of two of the buildings.

No buyers have shown up yet for the whole Byalata Laguna project but six or seven of the flats have already been sold.

(Dnevnik)

Bulgarians are still conservative about financial services with only a portion paying by credit cards and investing outside property purchases and bank deposits, showed a survey of market researcher GfK.

Credit card usage increased in the past three years as 9.2 percent of the population had one as at end-September and two percent planned to get one within a year. Nearly a third used debit cards.

Credit card holders are aged 20 to 50 on average, they are well-educated and hold well-paid full-time jobs.

More than 12 percent of Bulgarians use some kind of saving product, and about eight percent have opened deposits, the bulk of them to meet potential difficulties and others to provide for their kids’ future. Fewer than 10 percent save to continue their education and training.

Half of the polled would invest their savings in a new property, many of them married males aged 35-50 with good education.

Fewer than three percent have opted for pension insurance or investment funds, whereas insurance products are picked by less than one percent.

(Dnevnik)

The interest rates on the local-currency loans of Bulgarian banks climbed back to where they were three or four years ago in September 2008, central bank statistics showed.

Loan prices started sliding some three years ago when banks waged a fierce fight for customers and market shares.

The ongoing financial crisis, which dried up liquidity and inflated the cost of resources, sent rates of both loans and deposits in the opposite direction.

In 2004, the average rates of corporate loans hovered around 11 and 8% depending on currency.

In September 2008, the rates of lev-denominated loans for non-financial corporations soared to 11.25% from 9.68% a year earlier.

The average on euro-denominated loans rose to 8.42% from 7.99% in September 2007.

Local-currency consumer loans bore an average rate of 11.59%, up 2.09 percentage points on the year.

Housing loans in the same currency had an average interest rate of 9.45%, just about their early 2005 level.

Annual percentage rates rose to 12.37% for lev-denominated consumer loans and to 10.24% for mortgages, picking up a respective 1.34 and 1.22 percentage points.

APR on euro-denominated housing loans was 8.88%.

New housing and consumer loan promotions announced at the start of the active season, although much fewer than before the crisis broke out, left new loan rates unchanged or even tipped them lower than the previous month.

(Dnevnik)

The global financial downturn obliterated several years in the development of the region’s capital markets sinking investors’ expectations for corporate results to the times when the markets were making their first steps.

The region’s benchmark indices plummeted by an average of 60% from January to October 21 as their US and European counterparts shrank half as much, under data of Bloomberg agency covering nine markets.

The average price-earnings ratio slumped to 7 from a double-digit figure a few months ago, showed data of financial company Karoll, whose mutual funds invest in the region.

For comparison, the Dow Jones 30 companies still trade at a 15 P/E ratio on historical and 12 on projected earnings.

Investors’ persistent gloom at the backdrop of central banks and governments efforts aimed at soothing the pain on markets is stoked by fears of recession and how the region’s response to the crisis.

SOFIX, the key index of the Bulgarian Stock Exchange, ranked fifth in the region by heaviest slump nosediving 63% since January.

EU newcomers Bulgaria and Romania have the lowest P/E ratio even by historical earnings. Bulgaria’s blue chips have a ratio of 7.8 against 5 for the companies in Romania’s benchmark index BET.

The Russian market is the worst performer battered further by the war against Georgia and falling oil prices.

Analysts cannot say whether markets will hit new bottoms as fundamentals simmer on the back burner in times of panic.

Karoll Capital Management portfolio manager Nadya Nedelcheva warned investors should mind the expected slower economic growth, which will hurt corporate earnings and revenue.

(Dnevnik)

European Central Bank president Jean-Claude Trichet hinted that a new base rate cut decision may be made when the regulator meets next week, the Wall Street Journal reported.

The U.S. Federal Reserve may follow suit to prop up the faltering economy.

On October 8 the ECB, Fed and four leading European central banks took concerted action to slash lending rates by 50 percentage points to 3.75% in the eurozone and 1.5% in the US.

The new rate cut will try to combat looming recession but also slowing industrial production and falling oil set to drag down consumer prices.

The high inflation rate used to be Fed Chairman Ben Bernanke’s reason for keeping the key rate intact when the financial sector needed a strong hand and serious support.

Yet forecasts that the U.S. economy will not be back on track before second-quarter 2009 are putting pressure on the regulator for business activity stimulus and paving the way for further rate cuts.

The consensus is that the benchmark federal funds rate will be trimmed by 50 basis points but a 0.75 drop should not be ruled out, and it may not be the last one, said former Fed staffer Brian Sack.

Bernanke may eventually have to cut interest rates to as low as zero percent, just as Japan did in 1999. In fact, then-Fed Governor Bernanke said in 2003 he wasn't opposed to such a move if it proved necessary to aid the economy, Bloomberg reported.

(Dnevnik)