Abstract
While the 5.6% y-o-y flash estimate for Bulgarian real GDP growth in Q308,
provided by the National
Statistical Institute (NSI), indicated that our
full-year 2008 growth forecast was on target, the official
figure
published on December 15 has since derailed our projection. The revision was
driven largely by
stronger consumption and gross fixed capital formation
(GFCF) outturns. The new data reveals that final
consumption expanded by
5.4% y-o-y during the third quarter (from an initial estimate of 3.0%),
while
GFCF far surpassed the original 8.6% projection, to post growth of
22.3%.Given that the NSI has revised
up third quarter growth by a
considerable 1.2% to 6.8%, we have now adjusted our full-year growth
forecast to 6.4%, from a previous 5.6%. 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% outturn
pencilled in
for this year.
Given that exporters are more exposed to
slowing global growth (impacting the price received for
exports), the
sector is particularly responsive to changes in global consumption and
liquidity. This has
proved to be the case as export growth has been in
decline since the beginning of 2008. Imports,
meanwhile, having previously
outpaced exports for most of Q305-Q208, with growth accelerating to
13.7%
during the second quarter, only showed signs of slowing during Q3 when growth
slowed to 4.2%.
We expect imports to remain under pressure during 2009 as
domestic demand winds down and the private
sector starts to account for
its overleveraged balance sheet.
While exports have proved highly exposed
to adverse developments in the global economy, we believe
they will be the
first to rebound alongside the economic recovery of the Eurozone. Import
growth,
however, will likely remain subdued over the medium term as
international credit markets continue to
thaw and domestic demand remains
under pressure.
Since the last quarter, we have made two major changes to
the data in this report. First, we have – to the
greatest extent
possible – incorporated hard figures that have been made available by
the regulator(s) and
trade association(s) in each country. In some cases,
therefore, we have begun to include numbers that
pertain to the
development of the insurance sector through the early stages of the global
financial crisis.
Second, we have extended our forecasts out to 2013. In
all cases, we have reviewed the key growth
drivers – non-life
penetration and life density – that we had incorporated in our
forecasts.
The global financial crisis is likely to affect the various
segments of the global insurance industry in
different ways. In many
countries – especially in Europe – the coming recession points to
softness in the
non-life segment. In many cases, the numbers of policies
may fall so there should be downwards pressure
on premiums. By contrast,
the main problem for the life segment – in almost all countries –
is the extreme
volatility of financial markets. Over the longer term,
though, the fortunes of life insurance will recover;
thanks to the secular
growth of organised savings in most countries. China, where the larger
insurance
companies continue to achieve double-digit growth in premium
income, is a good example of this. Some
particular niches should also do
well in the current environment, such as legal liability insurance.
In
CEE, we profile 22 multi-national insurance companies. In alphabetical order,
these are AEGON,
AIG, Allianz, Aviva, AXA, Cardif, ERGO, Eureko, Fortis,
Generali, GRAWE, Groupama, HDIGerling,
HSBC Insurance, ING, MetLife,
Prudential Financial, QBE, RSA, UNIQA, Vienna
Insurance Group and Zurich
Financial Services. We also discuss the regional presence of
Belgium’s
KBC and Austria’s Erste Bank through a number of
insurance subsidiaries and explain the importance,
for each of the various
countries, of purely domestic firms.
BMI’s Insurance Business
Environment Rating for Bulgaria is 51.2.
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