Abstract
The government has announced a BGN5.6bn (US$3.66bn) fiscal stimulus plan for
Bulgaria, with the
funds invested in economic and social infrastructure
projects. While this pro-active stance on the part of
the government is a
positive sign, for this quarter BMI nevertheless maintains its concern for
Bulgaria’s
infrastructure sector as the tight credit conditions on
global markets are affecting project financing
operations while the
government relies on the private sector financing to support long-term
projects.
Indeed, news that the government is exploring the option of a
Russian government multibillion euro loan
for the country’s flagship
infrastructure project, the Belene NPP, indicates rising nervousness about
the
willingness (or possibly lack thereof) of the private sector covering
the costs of the construction of the
nuclear power plant. RWE, the
strategic partner in the project further said that it is reluctant to
commit
any of the agreed funds (close to US$1.7bn) until state-owned NEK
can secure its share of the financing.
On the a more positive note,
investments were pledged for a new US$500mn wind farm (a sector that has
shown great growth potential in the region) and the construction of a new
terminal in Varna’s airport.
The latest official preliminary data
for 2008 show that the Bulgarian construction and by extension
infrastructure industry reached a value of BGN4.7bn for the year (BMI was
estimating value at
BGN4.4bn). In BMI’s Q209 Bulgaria Infrastructure
Report we have revised downwards our forecasts for
2009 and in fact
anticipate that value of industry to contract slightly to BGN4.6bn (US$3.4bn),
as a
consequence of the overall deteriorating macroeconomic outlook.
Although the value of the construction industry per se is forecast to remain
quite low – averaging around
BGN5.1bn every year between 2009 and
2013 – the industry will contribute an estimated average of 6.5%
to
the GDP over the period. This value underlines its value for the economy, and
thus the threat its
potential downturn poses.
As a result of dwindling
external credit lines, shrinking export markets, widespread deleveraging and
the
gradual consolidation of corporate and household balance sheets,
economic growth will continue to slow
for the remainder of 2009, with a
1.1% expected in for this year, down from a projected 6.4% in 2008.
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