Bulgaria may further raise the price of the scanty credit and decelerate foreign direct investments (FDI) unless the government scales back more expenses and if revenue collection continues to decline, cautioned analysts polled by Dnevnik.

Earlier this week, the ruling coalition reiterated its plans to keep the current budget intact despite a recent warning by finance minister Plamen Oresharski that revenues could slip below the buffers provided in the budget.

His call on the government to trim more expenses fell on deaf ears, and ministers yesterday allocated extra financing to Phare-funded projects that were turned the tap by the European Commission (EC).

With revenues expected to decrease even deeper than expected, this year’s budget contains an unprecedented provision allowing the government to cut its own expenses if it was faced with running a budget deficit. Finance ministry staffers ruled out such an option, saying it would mean freezing pensions, a largely unpopular move with elections approaching in the summer.

Unlike politicians, many independent experts have voiced doubts that the year will end with a budget surplus or even at zero without additional spending cuts.

“It’s obvious that the budget will have to be revised in the second half, and it would be a downward revision. At the same time, a deficit should be avoided from a political point of view. Politicians are already fearful of swelling budget expenses. We shouldn’t let this happen as it would mount pressure on the currency board, which is our source of security,” said Georgi Prohaski, co-chairman of local non-governmental research outfit Center for Economic Development (CED).

The government has already limited wage growth options in the public sector but, for fear of a negative vote at the forthcoming elections, it does not dare touch its investment programme. Experts forecast that the next Cabinet will take the necessary steps to make sure Bulgaria does not close the year with a budget deficit.

The worst-case scenario of the finance ministry predicts a deficit of around 1% of the gross domestic product (GDP), which is seen at some BGN 70 billion, according to the latest estimates.

“The risks involve undermining confidence in the country, hence foreign capital inflows. Lending rates will increase with the higher risk premium. But it’s hard to specify the precise level that would trigger a reduction in capital inflows. If the government issues bonds to finance the deficit, it would increase debt. At present, government securities would be hard to sell or at a very high price. The general principle is that the higher government debt, the scarcer financing options available for the private business as interest rates will be rising,” said Georgi Angelov, senior economist with the Open Society Institute (OSI).

(Dnevnik)

Bulgarian real estate investment trust FairPlay Properties, a unit of property developer FairPlay International, posted a 40% drop in revenue to BGN 4.18 million in the first quarter as net profit fell 70% to BGN 494,000, showed the firm’s financial report filed with the Bulgarian Stock Exchange (BSE).

The bulk of the revenue was generated by 13 apartment sales closed in the Santa Marina and St. Ivan Rilski complexes, the company said.

In the first three months, the REIT sealed new sales deals for 15 flats with a total price tag of BGN 3.2 million and had 42 unfinished contracts of BGN 9.4 million it expects to receive during the next period under review.

“In March, we registered a significant increase in sales – 47 percent of out new contracts were signed in the last month of the quarter. Provided that the trend continues in the next quarter, we will have a good reason for a positive revision of the yearly profit forecasts announced at our general shareholders’ meeting,” said Manyu Moravenov, executive director of FairPlay Properties.

(Dnevnik)

Bulgaria offers enormous potential for electronics production, but the high inflation rate has been a major stumbling block for the sector, especially amidst the slower economic growth in the second half of 2008, according to a report of researchers Frost & Sullivan, quoted by Business Wire.

Bulgarian producers should brace themselves for mixed trends in 2009, but more numerous market opportunities will emerge over the next couple of years.

The global economic slowdown, which seeped into Central and Eastern Europe (CEE) in 2008, has seriously affected foreign direct investments in the Bulgarian electronics production sector, the research outfit said.

But the aggressive policy pursued by the government has caught the eye of investors and the sector will enjoy substantial capital inflows in the next few years.

Bulgarian ministers have lowered the minimum investment threshold, expanding the range of opportunities available to electronic investors in a region plagued by high unemployment.

The analysis predicts that Bulgaria is on track to become CEE’s leader in terms of foreign investments in the coming years.

The global economic turmoil has hamstrung the development of the Bulgarian electronics production sector, a trend which is likely to persist throughout this year. A further obstacle is slowing demand from key end consumers.

The proximity to Romania and the other developing markets in Eastern Europe makes Bulgaria a key market in the segment. Another feather in its cap is the relatively cheap labour, according to Frost & Sullivan.

(Dnevnik)

Dalkia Varna, which supplies heating to the eponymous northern Black Sea city, will lower hot water and heating tariffs from May after it switched on two 2.4 MW cogeneration facilities.

During the heating season, consumers will be charged BGN 5.50 per cubic metre of hot water, which is a BGN 0.60 reduction from last year.

Unlike other utilities in Bulgaria, Dalkia will not factor in the bill the difference in the logs of common and individual meters, using only the individual device instead. The cost will be offset by electricity output, which is bought up by the national power grid operator NEK at preferential tariffs.

Dalkia offers discounts of up to 20% to customers who use more than 8 cu m each month.

For each megawatt hour (MWh) of heating energy, the new facilities will generate almost as much electricity, which will be purchased at a preferential rate of BGN 208/MWh by the regional power distributor E.ON Bulgaria.

Since 2007, when French energy services provider Dalkia International acquired the regional heating utility, gas prices have almost tripled but Varna residents will pay less in the next heating season, said Dominique Duda, general director of the French firm.

Dalkia Varna has invested BGN 4.3 million into the cogeneration units, hoping to recoup it within four of five years, said president Iliya Nikolaev.

This year the utility will spend BGN 1.5 million on plugging in two shopping malls – Varna Tower and Galeria Mall Varna – and two private housing complexes.

Dalkia is also exploring options to convert biomass into heat, planning to construct a 5 MW biomass power station.

(Dnevnik)

The population of Bulgaria’s capital city of Sofia increased in 2008 amid rising birth rate and falling child morbidity, showed data of the National Statistical Institute (NSI).

The report found that Sofia has started to ride out the demographic crisis which hit in the last decade of the twentieth century.

But the population of Bulgaria’s largest city suffered from aging, with the average age growing to 40 years in the past ten years, from 38 in 1998.

Sofia accommodated around 1.2 million residents in 2008, which represents 16% of Bulgaria’s total population. The NSI expects that another 117,000 people will settle in the capital by 2025, excluding daily commuters and unregistered residents.

The NSI observed a continuing trend towards high morbidity among people aged under 65, who accounted for a quarter of all deaths in 2008.

Mirroring processes underway all across Europe, the number of Sofianites of working age diminished, with 79 people entering working age for every 100 retiring people.

There was an increase in the average birth ratio, with an average of 1.32 children born to a woman in Sofia. However, the report says this is far from the total fertility rate of the population of a minimum of 2.1 children born to a woman.

(Dnevnik)

Russia has named Gazprombank as one the institutions that could extend an export credit to Bulgaria’s national power grid operator for the construction of the Belene nuclear power plant in the Danubian town of the same name.

The news was announced by Bogomil Manchev, manager of local firm Risk Engineering, which provides technical services for the scheme in partnership with Parsons of the UK.

During his visit to Moscow two weeks ago, the Bulgarian energy minister Petar Dimitrov asked for the EUR 3.8 billion of budget money Russia has earmarked for the construction but both NEK and the ministry have been tight-lipped on the matter so far.

Bulgaria knocked on Russia’s door after the ongoing global financial and economic storm knocked down other financing options for what banks consider a risky project.

Other banks to potentially bankroll the nuclear scheme include Sberbank, Vnesheconombank and Vneshtorgovbank.

Earlier this year Russian media reported that Sberbank and Gazprombank have asked for a government lifeline to shelter against the global economic storm.

Ivan Atanasov, who chairs the project’s coordination and monitoring team, confirmed for Dnevnik that the issue of prospective lenders had been on the table but said no details have been agreed yet.

(Dnevnik)

Bulgaria is seeing a growing interest in renewable energy, with State Fund Agriculture (SFA) receiving 24 solar plant proposals in March alone, said consultants Elana Investment, which prepare EU-financed agriculture projects.

At the start of the year the fund’s payment agency opened application procedures for proposals under the measure for creation and development of micro businesses, which hands out European and national subsidies for alternative energy installations as well. Almost 200 proposals have been submitted so far, where green energy projects make a substantial part, the SFA said.

Twenty-three investors have handed in 24 proposals to develop photovoltaic (PV) capacities in the sun-kissed municipalities of Stambolovo, Madjarovo, Ivailovgrad and Kaloyanovo.

“Stambolovo alone offers potential for generation of nearly 3,000 MW of electricity annually, which will be enough to power the administrative buildings and the street lights in the 26 villages in the municipality,” said Kristina Tsvetanska, executive director of Elana Investments.

Bulgaria’s renewable energy subsidies reach up to EUR 200,000. The incentives are quite generous, practically covering 70% of the business plan costs, according to Tsvetanska.

(Dnevnik)