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Bulgaria Infrastructure Report Q3 2009Published by: Business Monitor International Published: Jul. 13, 2009 - 79 Pages Table of Contents
AbstractBulgaria’s economy and political situation are in a state of flux, pending the national elections in July.The European Commission reinstated the Instrument for Structural Policies for Pre-Accession (ISPA) andpre-accession assistance (PHARE) funds for projects in Bulgaria, providing a boost for the rulingSocialist Party. This was in response to the government taking strides to tackle corruption in theinfrastructure sector. Nevertheless, this may be too little, too late as the popularity of the Socialist Partyhas been steadily deteriorating. BMI’s Country Risk analysts expect a victory for GERB, the leadingopposition party, whose platform centres on a tough stance on corruption and a promise for an immediatestand-by agreement with the IMF to tackle the economic crisis. A change in government will result in major policy changes, which could also affect the infrastructuresector. Assuming victory for GERB, the party’s pledge to vehemently fight corruption does give reasonsto be optimistic that at least EU funds for infrastructure should not be suspended again on the grounds ofcorrupt practices. The possibility of an agreement with the IMF, which will be accompanied by a reiningin government expenditure and conservative fiscal policy, will limit the government’s ability to spendpublic money on infrastructure projects, though we do not anticipate this including the BGN5.6bn(US$3.6bn) fiscal stimulus plan that is in place to combat the crisis. Nevertheless, the decision to reinstate EUR1.25bn in funding for transport projects will catalyseconstruction for several major road projects that were at an impasse owing to the lack of funds, such asthe Trakia and Struma highways. In addition, and perhaps most importantly, the vote of confidence fromthe EC encourages private investors. Already, Deutsche Bank has expressed its intention to act asfinancier for projects in Bulgaria. The energy and utilities sector saw some major developments this past quarter as well. The governmentsof Russia and Bulgaria began negotiating a EUR3.8bn loan to finance the Belene nuclear power plant,while Bulgarian Energy Holding (BEH) transferred its stake in the Trans-Balkan PipelineConsortium, responsible for the Burgas-Alexandroupoli oil pipeline project, to state-ownedTechnoexportstroy. For this quarter, BMI maintains its concern for Bulgaria’s infrastructure sector as the tight creditconditions on global markets are affecting project financing operations while the government relies onprivate sector financing to support long-term projects. According to data from the Bulgarian NationalBank, the foreign direct investment inflows were 50% less in the first four months of 2009 comparedwith the same period in 2008, while preliminary Q109 data from the national statistics agency show thatconstruction industry value declined by 1.3% compared with Q108. In BMI’s Q309 BulgariaInfrastructure Report we have slightly revised our forecasts upwards for 2009 anticipating that value ofindustry to be BGN4.5bn (US$3.3bn). As a result of dwindling external credit lines, shrinking export markets, widespread deleveraging and thegradual consolidation of corporate and household balance sheets, economic growth will continue to slowfor the remainder of 2009, with a -3.1% real growth rate expected for this year, down from an estimated5.8% in 2008. Get Full Details About This Report >> |
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