% of GDP
Bulgaria earned its independence from the Ottoman Empire in 1878, but having
fought on the losing side in both World Wars, it fell within the Soviet sphere
of influence and became a People's Republic in 1946. Communist domination ended
in 1990, when Bulgaria held its first multi-party election since World War II
and began the contentious process of moving toward political democracy and a
market economy while combating inflation, unemployment, corruption, and crime.
Today, reforms and democratisation keep Bulgaria on a path toward eventual
integration into NATO and the EU - with which it began accession negotiations in
Update No: 082 - (01/03/04)
The Bulgarian situation is somewhat improving to judge by official figures. But it doesn't feel like it to many citizens. At least in the old days everyone had a job.
The current government, elected in 2001, led by Simeon II, the former monarch of the country in the 1940s as a boy, has pledged to maintain the fundamental economic policy objectives of its predecessor, i.e., retaining the Currency Board, practicing sound financial policies, accelerating privatisation, and pursuing structural reforms.
A new $300 million stand-by agreement negotiated with the IMF at the end of 2001 in succession to the previous one is helping the government maintain economic stability as it seeks to overcome high rates of poverty and unemployment.
IMF to the rescue
The executive board of the International Monetary Fund (IMF) recently completed the fourth review of Bulgaria's economic performance under its stand-by arrangement. In completing the review, the board approved the disbursement of SDR26m (about US$39m) to Bulgaria and the extension of the arrangement to March 15th, 2004.
According to the Fund, the board further granted Bulgaria's requests for waiving applicability for the end-December 2003 performance criteria on the overall fiscal deficit of the general government and the limit on the growth of the wage bill for 60 monitored state-owned enterprises, and for the non-observance of the end-December 2003 performance criterion on the reduction of tax arrears. The two-year stand-by arrangement was approved last February for a total amount of SDR240m (about US$358m). Until now, Bulgaria has drawn SDR188m (about US$281m) under the arrangement.
"Macroeconomic performance remains strong in Bulgaria. The authorities' economic programme, supported by the stand-by arrangement, is centred on the currency board and has been supported by a prudent and flexible fiscal policy and a broad programme of structural reforms. These policies have resulted in robust growth, low inflation, and a declining unemployment rate, although the high external current account deficit poses risks," Anne Krueger, first deputy managing director and acting chair of the recent board meeting, said upon the completion of the review.
Highlighting the country's progress, the IMF official noted: "The authorities' small surplus in 2003 helped contain the current account deficit. The small budget programmed for 2004 appears sufficiently prudent for now, especially given the built-in flexibility of budget implementation and Bulgaria's strong track record in this regard."
According to Krueger, the authorities have correctly decided to proceed cautiously with discretionary spending in the first three quarters of the year, and to postpone potential transfers to a state enterprise for road construction until at least the second half of 2004 and to make any such transfer contingent on macroeconomic developments.
Red vote ends the honeymoon for Simeon II
There is a widespread apathy in Bulgaria about politics. Municipal elections in the autumn last year saw turn-out at the lowest ever since the end of communism at 32%. For sound reasons nobody thinks anyone can really master the country's grave problems of transition.
The latest party to arouse disillusionment is only three years old, the National Movement of Simeon-II. The Bulgarians have delivered their verdict on the 800 days which Premier Simeon II Saxe-Coburg said in 2001 he would need to double their living standards.
The answer is a dramatic thumbs down at late October's municipal elections. These were won by the former communists, who gained 33% of the votes. The Bulgarian Socialist Party (PSB) was the clear winner, while the conservative opposition United Democratic Forces won second place with 21%. "There has been a clear winner in these elections," said Andre Raiechev, of the Gallup Poll Organisation. "That is the PSB. A third of Bulgaria has voted red."
The National Simeon II Movement of the premier came third on 11%. Its ally in the coalition government, the Movement for Rights and Freedom, mostly representing Bulgaria's 800,000 ethnic Turks, obtained 9%.
The result was a clear setback for the centre-right coalition that does not look likely to survive beyond the next parliamentary elections in two years' time.
Economy in the doldrums
The explanation is not hard to find. Despite positive growth rate figures for GDP of around 4% annually in the period since March 2001 when the government came to power, this has not shown up in people's living standards. Average salaries rose by 17% in the new government's period of office so far, to 143Ecu ($168) per month. A meagre result for a poor country, conclude the population.
Unemployment is in double figures at 12.98% of the work force, which is below the average for Central and Eastern Europe of 14.5%, and lower than in 2002 by 170,000 people, but too high for comfort.
Simeon is paying the price of raising expectations unduly in the electoral campaign of March 2001, now seen as a long time away. People were expecting a royal bounty and have got a beggarly response. There was in truth little chance of the former monarch keeping his word. Bulgaria will need time to turn the corner in terms of prosperity for the bulk of the population.
An austere budget deficit of under one per cent of GDP wins the applause of the international institutions, but not of the electorate. Penny-pinching impresses the bankers, but not the poor and needy, who abound in the Balkan country.
Bulgarian, Serbia-Montenegro ministers discuss regional carrier, highway project
Bulgarian Transport and Communications Minister, Nikolay Vasilev, and Amir Nurkovic, minister of internal economic relations of Serbia and Montenegro, met recently to discuss the establishment of a regional Balkan air carrier. The establishment of such a company will be the main subject of the talks during the forthcoming visit to Bulgaria of Stability Pact Coordinator, Erhard Busek, BTA web site reported.
So far talks on the subject of the air carrier have been conducted with the governments of Romania, Croatia, Serbia and Montenegro, Vasilev said and added that the governments of the separate states would not participate in the project financially. The European Bank for Reconstruction and Development has shown interest in funding the project, Stability Pact Coordinator for Bulgaria, Milen Keremedchiev, said.
He specified that the new air carrier would not compete with the national carriers of the Balkan countries in any way and regional flights will be serviced by small 40 to 100-seat aircraft. Vasilev said that during his meeting with Nurkovic he asked for support of the Serbian and Montenegrin government in gradually making Sofia a regional centre of air traffic for the Balkans, while the airport in Nis acts as a reserve of Sofia Airport in bad weather.
The two ministers also discussed the Sofia-Nis motorway, one of the Stability Pact priorities. Vasilev said that the pending ratification of a free trade agreement between the two countries would surely increase trade, which amounted to nearly US$250m in 2003.
The entire spectrum of issues related to infrastructure projects between the two countries will be finalized at the fourth session of the joint Bulgarian-Serb-Montenegrin Commission for Economic Cooperation, scheduled for the end of April or the beginning of May, the two ministers promised. The two countries will also come to an agreement regarding easing railway customs processing by electrification and joint customs control based in Dimitrovgrad on the Serbian side. Vasilev said that the traffic of passengers and cargoes along the railway line between the two countries has increased considerably over the past year.
Bulgarian, Russian officials discuss new nuclear plant project
Energy Minister, Milko Kovachev, met with a Russian delegation recently headed by the Deputy Minister for Atomic Energy, Vladimir Asmolov, to hear the Russian ideas vis-a-vis a project for completing the construction of the Belene N-plant, on the Danube. On the Russian delegation were representatives of Atomstroyexport, Atomenergoproekt and the Trade Representation of the Russian Federation. Kovachev told the Russian guests what has been done so far at Belene and what steps are yet to be made. He reportedly said that Bulgaria will need a new nuclear plant, to be commissioned some time between 2008 and 2010, BTA web site reported.
At a presentation to the Belene Advisory Council later in the day, the Russian delegation dwelled on their views for completing the Belene project based on the work done and equipment already supplied at the Belene site. The Belene Advisory Council has already heard presentations from Atomic Energy of Canada Limited and Skoda of the Czech Republic. They are expected to draw up a report based on these presentations, the Energy Ministry said.
Construction of Bulgaria's second nuclear power plant at Belene started in 1982. The project was mothballed in May 1990 and financing was limited. As Bulgaria started to prepare the decommissioning of the two oldest reactors at its only n-plant, Kozloduy, in December 2002 the government decided to revive the project. An environmental impact assessment report for the Belene project is expected to be ready at the end of April 2004. Various sources set the amount of investment already made in Belene at US$1.2bn to US$1.3bn. Some of the funding has gone into construction works and some for equipment which is still there and maintained in good condition.
In mid-January, presidents and vice presidents of four world energy companies - Atomic Energy of Canada Limited, Italy's Ansaldo Nuclear, Japan's Hitachi Corporation and Itochu Corporation - who were exploring opportunities for participating in the Belene project, visited Bulgaria.
Danish, Bulgarian ministers discuss EU accession talks
During her working visit to Denmark, Bulgarian European Affairs Minister, Meglena Kuneva, had meetings with Danish Foreign Minister, Per Stig Moeller, and Bertel Haarder, minister for refugees, immigration and integration and European affairs, as well as Henning Christoffersen, Danish representative at the European Convention, the Bulgarian Foreign Ministry Press Office said, BTA web site reported recently.
The issues that were discussed were related to Danish support for completion of pre-accession talks with the EU by the end of 2004, the European Commission's motion for a financial package for Bulgaria, Bulgaria's position on the future European Constitution and the coordination mechanism for developing a joint position of the Danish administration in the process of work with EU bodies. Kuneva had additional meetings at the Danish parliament (Folketing) and the Confederation of Danish Industries, where she briefed the interested parties on the course of Bulgaria's preparation for EU membership and this country's expectations by the end of 2004. Denmark's support for the completion of pre-accession talks by the end of 2004 and Bulgaria's accession as of January 2007 was confirmed at all meetings.
FOOD & DRINK
New Swiss Nestle products to hit shelves soon
Swiss chocolate giant Nestle is going to promote new products in the Bulgarian market, including baby nutrients, ice cream and bottled mineral water, Director General of Nestle Sofia Yanis Lazaridis announced recently. Until 2005, when the promotion campaign is planned to start off, the company will focus on the quality of its present products. Chocolate producer Nestle Sofia AD won in the category for putting into practice the most successful combination of employment programme and measures, stimulating the professional development of 620 individuals, New Europe reported.
AFI chief foresees US$1.6bn investment inflow
Bulgaria's Agency for Foreign Investments (AFI) expects that the flow of foreign investments into the country for the current year will top US$1.6bn, AFI chief Pavel Ezekiev told a recent press conference, novinite reported.
Ezekiev underlined that energy, transport and communications will be the economic sectors enjoying most interest from abroad, because of the forthcoming returns from the privatisation of BTC, Bulgartabac and energy distribution companies. "It was for the first time last year when Bulgaria went far ahead of Romania, Serbia, Slovakia and Hungary in investment rate as per capita, "Ekzekiev said.
Countries like Germany, Belgium, and Italy, which stood out as major investors during 2003, have considerably strengthened their presence in Bulgaria. Siemens is currently studying Bulgaria's and Romania's abilities to develop medical software, it became clear during the press conference. "Romania already has a ministry of high technologies, which provides for better administration, while Bulgaria's advantage is the human capital of highly qualified IT specialists and the competitive workforce price," Ezekiev noted and disclosed that the final decision will be known by the end of 2004. Major investors for last year in Bulgaria are Cosmo Bulgaria Mobile with total investments of US$170m made in GloBul followed by Petreco with US$50m and the Italian company Mirogglio with US$40m.
IT market amongst leading SE European countries
IT business in Bulgaria marked record high sales in 2003 hitting 29% growth in imported software and a 40% increase in imported hardware, independent analyst of the CBN Panov & Stoytchev company said recently. The results show that Bulgaria is steadily heading to join the top three southeastern European countries with major growth in the sector, New Europe reported.
Bulgaria's IT market is estimated at nearly US$250m, taking into account the US$ drop, the cheaper hardware and the slightly increased consumption, the report noted. During 2003 Bulgaria's IT market was segmented among the top brand hardware producers, including Hewlett Packard (HP), IBM, Fujitsu Siemens Computers (FSC) and Dell, as well as Acer (Thailand), and NEC and Toshiba (Japan). Panasonic, Epson, OKI Star are the most preferred brands of printers bought in Bulgaria, the research data revealed. The analysts from CBN Panov & Stoytchev concluded that the failed privatisation of the state telecom BTC during 2003 impeded the growth in net returns to the IT and telecommunications sector.
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