One fifth of Bulgarian businesses will freeze recruitment or reduce staff due to the rise in the social security contribution rate, showed a poll on 160 company chiefs by a local policy institute.

Independent economic policy think tank Institute for Market Economics (IME) estimated that the 26.6% rise in the social security rate from January 1 will cost companies BGN 545 million this year, or 0.8% of the projected gross domestic product (GDP).

Before the adoption of the government’s economic stimulus package, employers and economic analysts all said reducing the social security burden would be the most effective buffer against the crisis. World Bank chief economist Simeon Dyankov told 24 Chasa daily in an interview on Tuesday that the biggest risk for Bulgaria is the massive wave of lay-offs already sweeping into Eastern Europe. He quoted World Bank estimates that decreasing the social security contribution rate by 5% could save 130,000 Bulgarian jobs.

“EU countries have already adopted preferential VAT rates for labour-intensive goods and services. Bulgaria has a flat rate and the only measure to cushion the blow on the labour market is the reduction in social security contributions,” said Ivo Prokopiev, chairman of the Confederation of Employers and Industrialists in Bulgaria.

Finance minister Plamen Oresharski said the crisis has taken a turn for the worse with economic activity slowing faster than expected. “This is worrying as it will affect not only the level of employment but also revenue, and these are processes we are going to see in the next month,” he said.

However, the government does not plan to lower the social security contribution rate as a measure to counter unemployment.

“A reduction of the social security burden is not on the agenda even for our next term in office. This can only happen when the pension system is reformed but the mechanical reduction carried out during this term will not be repeated,” said parliamentary economic committee chairman Yordan Tsonev of the Movement for Rights and Freedoms (MRF).

(Dnevnik)

Fiscal policy is not the way to kick-start the Bulgarian economy and the social security contribution rate will not be put down to improve competitiveness, ruling coalition MPs polled by Dnevnik said.

The government cannot afford to loosen the purse strings as it aims to combat the crisis with public spending, and cost optimisation will start from salaries, said members of the leftist Bulgarian Socialist Party, the predominantly Turkish Movement for Rights and Freedoms and centrist National Movement for Stability and Prosperity (NMSS).

After the government turned a deaf year to multiple calls by the opposition and analysts to reduce the social security burden, the International Monetary Fund’s warning that the lev is overvalued against the euro by between 7 and 20% also passed unnoticed.

At the same time, the peg to the euro is raising the cost of Bulgarian goods, experts said.

The Cabinet plans to keep intact salaries in the public sector. The new formula will make this possible only with serious staff downsizing, a finance ministry source commented.

Employers’ organizations have long ago said the rise in wages should be arrested until labour productivity increases.

IMF’s calculations of the lev exchange rate are based on several theoretical frameworks but macroeconomists told Dnevnik models may not give precise results in an uncertain environment. In times of crisis, equilibrium levels can easily change and should therefore be monitored closely, they said.

The crisis crumbles consumption, narrowing the trade deficit and the current account deficit, and therefore divergences can be quickly corrected as has happened before, said Georgi Angelov of Open Society Institute.

Timothy Ash, head of central Europe, Middle East and Africa research at Royal Bank of Scotland, said costly exports will impede the competitiveness of the Bulgarian economy and put pressure on the trade balance this year. However, keeping the currency board is all up to the government, he noted.

(Dnevnik)

Utility companies CEZ, Toplofikatsia and Sofiagas will be charged by the Sofia municipality for building grids on municipal property, under a new ordinance being discussed.

Under the proposal, energy companies will pay BGN 1 per running metre per year to build new grids or expand existing capacities, said chief secretary Rosen Zhelyaskov.

The fee will slightly raise customers’ power, heating and gas bills as it is an operating cost for the firms, he explained.

Companies will pay the charges before obtaining building permits and size will differ in zones, with BGN 0.80 proposed for municipal land in smaller villages and BGN 0.50 for pavements, streets and properties outside the city.

No fees will be collected if pipes are laid on existing tracks.

Zhelyaskov said the new fee has been coordinated with the power supplier CEZ. The utility declined to discuss the measure, and heating firm Toplofikatsia could not be reached for comment.

We will expand our Sofia grid by 25 kilometres but will apply for a building permit for a 160 km area and pay the fee, said Sofiagas executive director Plamen Hitev. The company has not yet calculated the new fee’s impact on customer bills.

(Dnevnik)

The Bulgarian government will allocate an extra BGN 190 million to training, qualification and job creation to offset the risk of a more negative impact on the labour market, social minister Emilia Maslarova said.

The fresh money under the Human Resources operational programme will be available for qualification and jobs for 7,000 unemployed and training of 40,000 people who were fired due to the global economic crisis.

The social ministry aims to secure jobs for 32,000 people for no less than nine months.

More than 150,000 people have joined the programme so far under 800 projects worth BGN 255 million, Maslarova said, calling on businesses, unions, NGOs and local governments to waste no time and tap into the resources.

The Human Resources programme is supplemented by the BGN 190 million national employment plan. The funding is currently available for training and qualification of poorly educated and semiliterate people. BGN 65 million was recently channeled to similar programmes targeting youths and permanently unemployed people aged over 50.

In the meantime, local independent economic policy think tank Institute for Market Economics (IME) calculated businesses will lose around BGN 5.6 billion in the next ten years from the rise of the bottom social security contribution rate to 26.6% in 2009.

(Dnevnik)

“Hope” has turned into the buzzword on the Bulgarian Stock Exchange (BSE) or at least that is what investors want.

Wednesday’s session saw hefty volumes but after zigzagging for a while indices ended mixed.

Total trade turnover added up to over BGN 3.26 million, of which nearly a third came from bond deals on the UTC market.

The broader BG40 registered the highest growth, adding just over 1% to 87.82 points.

BGTR30 of the stocks with the highest market capitalisation and liquidity edged up 0.34% to 193.92 points.

SOFIX of the blue chips dipped almost 1% to 263.32 points, which is its lowest since the end of February.

Active trade in property fund stocks sank the industry index BGREIT by 0.34% to a new low of 37.93 points.

“It’s nothing new and it’s due to single large deals with Corporate Commercial Bank and special purpose vehicles,” said Svetoslav Abrashev, broker at Sofia International Securities, commenting on the recent rise in volumes.

CCB traded almost 3,000 shares, which dragged it 2% to BGN 73. First Investment Bank sold over 10,000 shares and fell 1.2% to BGN 1.24. Central Cooperative Bank rose to BGN 0.81.

Car battery maker Monbat and road builder Holding Patishta also enjoyed keen interest, gaining 2.3% to BGN 3.64 and 0.5% to BGN 2.05, respectively.

(Dnevnik)

The Bulgarian real estate market has hit the rock bottom and will not bottom out any time soon, said Yavlena agency manager Strahil Ivanov.

Speaking to students at the University of National and World Economy on Wednesday, Ivanov predicted the prices of some properties could drop by 5-10%. Now is the time to hunt down bargains, he said.

His opinion is echoed by most of Bulgaria’s major property agencies.

Tsvetelina Taseva, executive director of Address, told a recent conference buyers can take 15-20% off the price if they have the money at hand.

Ivanov estimated properties at the heart of the capital are up for grabs at EUR 2,000 per square metre at the moment that could fall to EUR 1,600 in serious interest.

Yavlena said deals in January and February were scarce, and forecast quarterly numbers will be three times lower. But the company is receiving inquiries from prospective buyers, which is a sign that the market is about to pick up. However, this is unlikely to happen before the end of the year, according to Ivanov.

Another realtor, Elta Consult, has said more deals will be struck towards the end of the year but prices will be lower.

Last week it emerged that prices in the mass home segment have gone back to their levels of two years ago. Two-room flats in Sofia and Varna are available for purchase for EUR 50,000 to EUR 70,000, according to a survey of Raiffeisen Real Estate. Sofia sellers ask for 20% more than what buyers actually pay, the study found.

(Dnevnik)