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Moody's: Bulgaria Economy Stable,
2009 Recession Expected
Bulgaria Business Endangered by
Mounting Corporate Debt
Irish Investment Fund Buys Bulgarian
Sea Property from Desperate
Mall for EUR 52 M Opens in Bulgaria
City of Plovdiv
Properties in Bulgaria Managing Director
T: +359(0)2 9862863
F: +359(0)2 9861743
While Bulgaria's tourism sector is already
suffering from the financial crisis, the government has been quick
to enact necessary measures to soften long-term impact.
According to Anelia Krushkova, the head of
Bulgaria's state Tourism Agency (SAT), the number of foreign
tourists in Bulgaria has declined this winter season and is
anticipated to shrink to an even greater extent during the summer of
2009. Yet, the government tourist agencies, as well as tourism
operators, are responding in full force.
A SAT report published in January shows that
throughout 2008 there was a 10.4% year-on-year increase in the
number of visitors over 2007. Krushkova said that 5.7m of the
visitors came for tourism, 73.4% of which were from EU countries.
The country generated a total of Lv2.4bn (EUR1.23bn) in tourism
revenues between January and November 2008, an increase of 11.5%
over 2007, according to Krushkova.
However, figures from the end of 2008
demonstrate tourism rates have been on the downturn. Bulgaria's
National Statistics Institute reported that in December 2008, just
over 385,000 tourists came to Bulgaria, 190,000 of which were
holiday and recreation travellers. Of the EU countries, Greece and
Romania top the list of the number of visitors, with 104,000 (27%)
and 84,000 (22%) respectively, while the UK came in third with
12,500 (3%) tourists. Of non-EU countries, Turkey and the Republic
of Macedonia saw the most travellers to Bulgaria, with 55,600 (14%)
and 26,300 (7%) visitors respectively. The Russian Federation
clocked in at 8100 (2%) visitors. The 2008- 2009 winter season has
already seen a decline by between 15% and 20% compared to last
year's figures, according to Krushkova.
At a January press conference Krushkova
predicted that summer 2009 would be a tough one for Bulgaria
tourism. The Sofia News Agency reported in February that early
bookings of summer holidays demonstrate a similar impact, with
figures showing a drop between 25% and 50% compared the numbers
registered in February 2007. The financial crisis seems to be
leading an increasing number of foreign tourists to wait until late
spring or even early summer to book their trips, in the hopes of
finding last-minute discounts on their holiday.
Region-wide tourism is expected to decline at
similar rates, and governments have sought to address the growing
concern. Greece has already increased its advertising budget by 50%
and introduced tax cuts for companies operating in the tourism
industry. Turkey has announced its plan to actively promote itself
in 80 countries. The Romanian Tourism Ministry is considering giving
employees vouchers for local resorts in the hope of encouraging
Bulgaria too has taken various steps to
increase tourism in the country. Under the Operational Programme
Regional Development 2007-2013, six projects have been approved that
will fund SAT's various campaigns. One campaign focuses on
international tourists from Germany, Britain, and Russia, where
there is much room for growth, primarily through advertisements on
CNN and Eurosport channels. Another campaign, worth Lv 5.7m (EUR3m),
focuses on winning back tourists who, recently, have preferred
foreign destinations. And the Agency is to spend Lv6m (EUR1.23bn) to
create a multi-media catalogue of the country's most attractive
tourist sites to attract visitors from both home and abroad.
In an effort to further attract tourists, Elena
Poptodorova, the recently appointed ambassador to the Black Sea
region, has focused on uniting bordering countries to increase
Much focus has, in particular, been placed on
Russian tourists, who have been the main source of summer visitors
in the past. Last year 250,000 Russian tourists visited Bulgaria,
spending roughly EUR1000 per person. Bulgaria opened a business
forum in Moscow on February 5 titled "Bulgaria Today - Realty,
Tourism and Wine". The business fair continued alongside official
activities intended to mark the "Year of Bulgaria" in Russia. There
is talk of the Bulgarian state covering visa prices for Russians, so
as to reduce the costs of travel packages and therefore attract more
tourists. According to Nelly Sandalska, CEO of Balkantourist, this
measure will cost the state EUR8m, but without such intervention,
the number of Russian tourists to Bulgaria's Black Sea resorts is
expected to shrink by 50%.
In addition to government efforts, tourist
resorts have been expanding the number of hotels and holiday
apartments in anticipation of greater demand. Easyjet has recently
added several flights from Manchester, according to an Easyjet
spokesperson who commented on the city's potential. These avenues of
growth explain the World Travel and Tourism Council's expectation
that Bulgaria will attract around 16m visitors per year by 2017.
This increase should contribute to an increase of 12% in gross
domestic product (GDP), as well as create a 10.2% increase in
employment. The political commitment and infrastructure growth will
allow Bulgaria's tourist industry to prosper in the
Economy Stable, 2009 Recession Expected
Bulgaria is likely to experience a difficult recession in
2009 as the economy suffers from shrinking exports and slowing
inflows of foreign capital.
Moody's Investors Service has affirmed Friday
the Baa3 local and foreign currency ratings of the Bulgarian
government, saying that the outlook remains stable.
"Bulgaria is likely to experience a difficult
recession in 2009 as the economy suffers from shrinking exports and
slowing inflows of foreign capital... Nevertheless, many years of
prudent fiscal policy and low debt mean that the government is well
positioned to cope with the situation", Kenneth Orchard, Vice
President-Senior Analyst in Moody's Sovereign Risk Group,
Moody's recognises that the Bulgarian
government used the recent period of economic growth to strengthen
its financial position, and budget surpluses averaged 2,7% of GDP
between 2004 and 2008, debt on GDP base declined to 14%, and a
significant fiscal reserve was accumulated.
Domestic credit, external debt and the current
account deficit all increased at rapid rates from 2005 to 2008,
Moody's announced. The banking sector presently appears to be in
reasonably good shape, with relatively high capital adequacy and
liquidity ratios by international standards, but these buffers could
be quickly eroded if the downturn intensifies, the report
"The decline in foreign financing will probably
cause a sharp downward adjustment in the current account deficit,
implying declining output and weak government revenue growth.
However, Moody's believes that low wages and a flexible labour
market will ease the adjustment and ultimately allow Bulgaria to
rebound when the regional economy improves", Orchard cautions
Moody's believes that a greater risk comes from
the large amount of private sector external debt that must be
re-financed in 2009.
The last rating action on Bulgaria was
implemented on 25 September 2008, when Moody's changed the outlook
to stable from position on the local and foreign currency debt
obligations of the government.
Endangered by Mounting Corporate
Bulgarian companies are endangered by the fast
increase of corporate obligations, including debts between separate
That may cause a chain bankruptcy, the
Bulgarian Industrial Association's deputy chairman, Kamen Kolev,
said Tuesday, cited by Bulgarian National Radio.
The average debt rate in the real economy has
doubled in the last year, growing from 20% to 43%. Corporate debt is
expected to reach EUR 150 B by the end of 2009, which is twice as
much as Bulgaria's Gross Domestic Product (GDP).
Fund Buys Bulgarian Sea Property from Desperate
Appreciating Assets Ltd., an
Irish based investment fund, is buying up properties on Bulgaria's
Black Sea coast, primarily targeting UK and Irish owners who bought
during the boom years and are now desperate to sell, the
International Herald Tribune reported late Friday.
"You've got a number of people who agreed to
buy property off-plan [pre-construction] and the people can't come
up with the remaining balance of funding," said the company director
Cullen's group has raised ˆ7 million for its
Bulgaria-focused fund (about million), he says. And so far there has
been no shortage of interested sellers. Since mid-December the group
has completed on 22 purchases and another 15 are pending, Cullen
Typically they are paying in the EUR 60,000 to
EUR 70,000 range for "good size apartments in a good development
with close proximity to the beach."
Not everyone is thrilled when the company
announces a price, he acknowledges. But real buyers willing and able
to close a deal are a rare commodity in Bulgaria these
The fund's strategy is to collect rental
revenue on the properties for five to seven years, banking on the
continued growth of the Black Sea's tourism business, a plan many
owners may not have the patience or resources to pursue.
Mall for EUR 52 M
Opens in Bulgaria City of Plovdiv
Plovdiv Mayor (second on the left); Peter Dudolenski, CEO, RESB
(middle); Todor Petkov, Plovdiv District Governor (second on the
right). Photo by M3 Communications Group Inc.
The newest shopping mall in Bulgaria, Mall
Plovdiv, was opened in the southern Bulgarian city of Plovdiv on
More than EUR 52 M have been invested in the
construction of the first shopping mall of its kind in the city of
Mall Plovdiv is located on an area of 45 000
square meters, and hosts over 110 famous brands some of which are
entering Plovdiv's market for the first time.
These include Mango, Esprit, New Yorker,
Benetton, Terranova, Calliope, XYZ, Oviesse, Tom Tailor, Lee Cooper,
Kenvelo, Celio, Etam, Seven Seconds, Mexx, Naf Naf, Tally Weijl,
Fox, Mothercare, Okaidi, adidas, Pierre Cardin, Etere, Leonardo,
Geox, Foot Comfort, Hush Puppies, Beauty Zone, Oxette, Swarovski,
Levi's, Playlife, Studio Scandal, Replay.
The Plovdiv Mayor, Slavcho Atanasov, pointed
out he was happy the city kept attracting large-scale investments.
The Bishop of Plovdiv, Nikolay, inaugurated Plovdiv's first shopping
mall with the traditional religious ritual.
"I am not just happy, I am especially proud and
thankful to all institutions and partners who worked on the
realization of the project of Mall Plovdiv - a modern and unique
complex, combining hi-tech, aesthetics, and entertainment", the CEO
of the Mall Plovdiv investor, Real Estate Services Bulgaria, Petar
Dudolenski said at the opening.
Thus, Real Estate Services Bulgaria (RESB)
became the only company in Bulgaria which has taken part in the
construction of two shopping malls - Mall Plovdiv and Mall of Sofia,
which was the first shopping mall in Bulgaria, and was opened in
RESB is currently working on the construction
of three more shopping malls - Mall Rousse, Mall Stara Zagora, and
Park Tower in Sofia.
100% of RESB is owned by Cinema City
International, a leading international movie theaters operator with
over 600 multiplex complexes in Europe and Israel.
*The above information courtesy of