Current account gap widened by 72.1% y/y to 17% of GDP in January-October. Net FDI inflows fully covered CA gap in January- October
Foreign trade deficit widened by 37% y/y to EUR 5.78bn (21.6% of GDP) in January- October
Gross external debt grew by 31.1% y/yto 93.2% of GDP as of end-September
Consumer price inflation speeds slightly to 12.6% y/y in November. The index of producer prices accelerated to 11.3% y/y in October from 9% y/y in September
Industrial sales growth accelerated to 10.9% y/y in October
Retail sales rose slightly by 2.3% y/y in October
Household monetary income and expenditure increased by 16.7% y/y and 22.6% y/y respectively in October
Unemployment dropped to 6.62% in November
Consolidated budget surplus widened by 52.5% y/y to EUR 1.815 bn (6.5% of GDP) in January-October
Money supply growth continued to slow down to 28.5% y/y as of end-October. credit to nongovernment sector soared by 59% y/y at end- October
Banks’ net profit improved 59.5% y/y to EUR 493 mn in January-October
In November bourse indices fell by 15% and the BSE lost nearly BGN 2.2 bn (8%) of its market capitalisation
I. EXTERNAL SECTOR
1. Balance of Payments
Current account gap widened by 72.1% y/y to 17% of GDP in January-October Current account (CA) gap widened by 72.1% y/y to EUR 4.554 bn in January-October, according to Central bank preliminary data. In relative terms, the CA gap accounted for 17% of the projected full-year GDP in January-October relative to 10.5% a year ago and 14.5% in January- September. In October alone, the CA deficit rose by 24.7% y/y to EUR 681 mn.
The trade balance continued to be the main reason for the CA gap widening.
In October the net income marked a surplus of EUR 56 mn, which was a 6-fold increase as compared to October 2006 but in the period January-October the income balance was negative amounting to EUR 147.1 mn.
Net current transfers decreasedby 71.2% y/y to EUR 16.5 mn in October and by 53% y/y to EUR 260 mn in January-October.
In October the service balance was negative amounting to EUR 55 mn, down by 154.3% y/y due to transportation. Transportation balance was negative and stood at EUR 34.5 mn in October relative to a negative balance of EUR 3.8 mn in October 2006. Tourism revenues rose by 18.7% y/y to EUR 106 mn in October and by 11.2% y/y to EUR 2.099 bn in January-October.
However, the overall balance of payments continued to improve (by 105.2% y/y to EUR 3.075 bn in January-October), on the back of strong financial inflows. The reserve assets of BNB increased by EUR 2.8bn in January-October.
The Ministry of Finance has recently revised upward its expectations for the CA deficit to 21% of GDP this year and 21.9% next year.
Balance of Payments Flows (EUR mn) (chart)
Net FDI inflows fully covered CA gap in January-October
Net FDI inflows increased by 6.7% y/y to EUR 550 mn in October and 31.5% y/y to EUR 4.52 bn in January-October, according to Central bank preliminary data. Net FDI accounted for 16.1% of the projected full-year GDP and covered the whole CA deficit over the same period.
By country, the largest investmentsin Bulgaria for the reporting period came from UK (17.9%), Austria (7.6%) and Belgium (7.1%).
Foreign trade deficit widened by 37% y/y to EUR 5.78bn (21.6% of GDP) in January- October
Foreign trade deficit widened by 18% y/y to EUR 697.3mn in October alone and 37% y/y to EUR 5.78bn in January-October, according to Central bank preliminary data. In relative terms, it accounted for 37% of GDP as compared to 16.8% a year earlier. Exports’ growth reached 23% y/y in October as compared to 14.2% y/y in September and outpaced by almost 2 percentage points imports’ increase. Import growth rate (cif) decelerated slightly from 22.9% y/y in September to 21.5% y/y in October. Trade with non-EU countries accounted for 46.4% of the gap.
According to experts, in short-term run the foreign trade deficit will continue to widen due to the increased imports of energy resources and investment goods.
Foreign Trade (EUR mn) (chart)
2. External Debt
Gross external debt grew by 31.1% y/y to 93.2% of GDP as of end-September
Gross external debt grew by 31.1% y/y and 2% m/m to EUR 24.9 bn as of end-September accounting for 93.2% of the projected full-year GDP, according to Central bank preliminary data. The foreign liabilities in the private sector increased by 44.9% y/y to 83.8% of the total liabilities while the state leverage dropped by 12.1% y/y. The share of short-term debt increased by 1.5pps in a month to 32.4% of the total external debt.
In January-September the external debt servicing amounted to EUR 4.377 bn (16.4% of GDP) against 12.1% of GDP for the same period last year.
Internal financing within foreign-owned companies accounted for 33.6% of the total external debt.
Banks’ external debt rose by 43.3% y/y ( EUR 1.354 bn) and by 10.3% m/m (EUR 420.2 mn) reaching EUR 4.48 bn (16.8% of GDP). The foreign liabilities of commercial firms (state-owned and private companies) grew by 38.5% y/y to EUR 8.946bn as of end-September.
Gross Exte rnal Debt, EUR bn (chart)
II. REAL SECTOR
1. Inflation
Consumer price inflation speeds slightly to 12.6% y/y in November
The consumer price index sped up again in November and reached 12.6% y/y after the oneoff slow down to 12.4% y/y in the previous month, according to NSI data. The indicator reached a 7- year high of 13.1% y/y in September due to supply shocks in the agricultural sector mainly. On a monthly base, CPI also accelerated to 1.6% in November from 0.6% in October. Inflation from the beginning of the year accelerated to 10.8%. The growth of food prices stepped down slightly from 22.4% y/y in October to 21.6% y/y in November but is still twice higher as compared to the total index. The increase of services prices remained flat during the month. The acceleration resulted from speeding of the price indices of catering and non-food items, which account for higher shares in the harmonised index of consumer prices (HICP). HICP increased by 11.4% y/y against 10.6% y/y in October and 11% y/y in September. The government revised recently its expectations for the CPI to an annual average of 7.2% this year from previously projected 4.4% and end-year of 9.3% as compared to 3.1% respectively.
Price Dynamics (Jan/05-Nov/07) (chart)
The index of producer prices covering industrial goods traded on the domestic market accelerated to 11.3% y/y in October after a one-off slowdown to 9% y/y in September, according to NSI data. Prices of metals extraction surged by 12.1% y/y driven by external demand. On the other hand, the group of food products, which has a large weight in the CPI basket, increased by 23.4% y/y following significant supply shocks in the summer months explained by bad weather conditions and inadequate infrastructure in the agricultural sector.
2. Industrial sales
Industrial sales growth accelerated to 10.9% y/y in October
Industrial sales growth acceleratedto 10.9% in October from the revised 8.2% y/y in September, according to NSI preliminary data. Industrial production also accelerated to 10.4% y/y in October from 8.9% y/y in September. The acceleration is due to the rebound of some major industrial branches like textile, food and chemical production. The narrowing of the negative growth of mining industries also contributed positively. Manufacturing of radio, television and communication equipment, manufacture of medical, precision and optical instruments, watches and clocks, production of motor vehicles and trailers and some other branches of high value added resumed its double digit growth rates again. Those branches have low share in total sales but continuously improve the technical intensity of the sector. Utilities faced some minor downward correction to real 27.3% y/y in October.
Industrial sales & Output, % y/y (chart)
3. Retail sales
Retail sales rose slightly by 2.3% y/y in October
The growth rate of the retail sales rose by 0.2pps as compared to a previous month and reached 2.3% y/y in October after the downward corrections in the last ten months, according to NSI preliminary data. Wholesales growth also improved and reached 1% y/y during the month, against revised 0.4% y/y in September. Trade of motor vehicles continues to increase at much faster rates of about 20% y/y.
4. Household Consumption
Household monetary income and expenditure increased by 16.7% y/y and 22.6% y/y respectively in October
Household monetary income increased by nominal 16.7% y/y in October relative to an increase of 15.5% y/y in September, according to NSI data. Household monetary expenditure growth outpaced the monetary income growth and reached 22.6% y/y in October.
The earnings from wages and salaries hold the highest share of 51.7% in the households’ budget, followed by pensions with 25.7% and earnings from entrepreneurship with a 6.1% share.
The payments for foods and non-alcoholic beverages retained the highest share of near 35% in the structure of the households’ monetary expenditure. As compared to a previous month, the payments for housing, water, electricity and gas increased their share from 13.3% to 14.8% in October because of the heating season.
5. Unemployment
Unemployment dropped to 6.62% in November
Unemployment rate preserved its downward trend in November reaching 6.62%, down by 2.07 pps y/y according to National Employment Agency. The number of jobless decreased by 76 652 over the past year and by 4 101 people as compared to a previous month to 245 275 in November.
Unemployment Rate (chart)
II. FISCAL SECTOR
Consolidated budget surplus widened by 52.5% y/y to EUR 1.815 bn (6.5% of GDP) in January-October
The consolidated budget surplus widened by 52.5% y/y to BGN 3.551 bn (EUR 1.815 bn) in January-October, according to Finance Ministry data. In relative terms, the surplus accounted for 6.5% of the projected full-year GDP and 7.4% when the transfer to the EU budget is excluded. The fiscal revenues grew by 19.3% y/y in January-October against 19.5% y/y in January- September. The fiscal expenditures rose by 10.2% y/y for the reporting period. The government will allocate BGN 1.379 bn or about 2.5% of GDP by the end of the year. Most of the transfers will be directed to investments in infrastructure, introduction of emergency phone number 112, and purchase of fuel for the state’s strategic reserve. The cabinet decided also to disburse 0.4% of GDP as end-year pension bonuses to about 2.3mn persons on population of 7.7mn.
Republican budget surplus increased by 45.4% y/y to BGN 3.242 bn (EUR 1.658 bn) in January- October. Republican budget revenues and grants accounted for BGN 13.25 bn, up by 20.2% y/y due to the increased direct tax revenues. Tax revenues in the republican budget grew by 21% y/y in January-October to BGN 11.4 bn. Direct taxes marked the biggest increase of 32.5% y/y. Indirect tax revenues rose by 17.1% y/y, accounting for 72.1% of the total amount of the tax revenues.
VAT receipts registered a 16.2% y/y increase in January-October. The revenues from excise taxes also grew - by 32.5% y/y. On the contrary, the duties revenues decreased by 56.6% y/y in January-September as a result of the adoption of the EU common customs tariff with third countries. In the commodity structure of the duties revenues three main groups increased their share: cars, sugar and machines, which hold 49.3% of the total. The duties collected from the imports form China stood at BGN 46.6 mn or 29.6% of the total duties volume in January- October.
Non-tax revenues in the republican budget rose by near 3% y/y in the reporting period.
Republican budget expenditure (excl. the transfers) increased by 7.2% y/y in January- October.
IV. MONETARY SECTOR
1. Monetary Aggregates
Money supply growth continuedto slow down to 28.5% y/y as of end-October
Money supply (M3) slowed down its annual growth rate from 29.1% y/y as of end-September to 28.5% y/y as of end-October after the adoption of the new measures by the Central bank in the beginning of September. Overnight deposits and deposits with agreed maturity up to 2 years marked a considerable annual increase of 36.6% and 29% respectively as of end-November. The foreign reserves of the Central bank rose by 1% m/m to BGN 23.120 bn (EUR 11.821 bn). Commercial banks decreased their deposits with the Central bank by BGN 103 mn, which was partly compensated by the increase in the government deposits of BGN 342.5 mn. The foreign reserve coverage of the money base remained high at 185% versus 180.5% as of end- September. The monetarization of the economy reached 70.7% of the projected full-year GDP.
Money Supply (M3) BGN mn, end-of-month (chart)
2. Domestic credit
credit to non-government sector soared by 59% y/y at end-October
Despite the increase in the ratio of the required reserves in September by the Central bank, the credit activity of the commercial banks continued to expand with high rates. Domestic credit growth accelerated from 46.3% y/y as of end-September to 51.8% y/y as of end-October, according to Central Bank data. The stock of all credits reached BGN 29 bn (EUR 14.86 bn) or 53% of the revised GDP forecast. credit to non-government sector grew by 59% y/y as of end-October to BGN 33.604 bn (EUR 17.2 bn) pushed by high growth rate of non-financial companies‘ loans (63.5% y/y) and credits to households (52.5% y/y).
Domestic credit, % of GDP (table)
The mortgage loans slightly deceleratedits growth pace from 73.8% y/y as of end-September to 72% y/y as of end-October. On the contrary, consumer loans accelerated to 41% y/y as of end-October from 34.7% y/y in the previous month.
V. FINANCIAL SECTOR
1. Banking Sector
Banks’ net profit improved 59.5% y/y to EUR 493 mn in January-October
The aggregated net profit of the 30commercial banks rose by 59.5% y/y to BGN 964.46 mn (EUR 492.9 mn) in January-October, according to Central bank data. The total value of assets increased by 35.3% y/y to BGN 53.2 bn (EUR 27.2 mn) at end-October. In relative terms, the assets account for 97% of the projected full-year GDP and are likely to exceed the 100% benchmark by the end of the year. The share of net credits to the private sector (enterprises plus retail exposures) reached 62% of all assets.
Gross loans to enterprises surged by near 63% y/y to BGN 21.885 bn at end-October. The greatest number of them is allocated to companies in the merchandise sector (BGN 2.3 bn), followed by manufacturing industry (BGN 1.4 bn). The highest amount of the credits is extended to the energy sector, where the average amount of the borrowing exceeds BGN 1.32 mn. The real estate marks a record growth of the received loans (more than BGN 1.0 bn ) which is a 160% rise on a year ago.
Retail exposures rose by 4.4% m/m and59.4% y/y. Mortgage loans increased by 43% y/y to BGN 5.4 bn. Consumer loans amounted to BGN 6.330 bn at end-October, up by 32.5% y/y.
The funds attracted by commercial banks as of end-October increased by BGN 1.0 bn (2.2%) as compared to the previous month to BGN 46.6 bn (EUR 23.82bn) or 85% of the revised GDP forecast. Deposits of private sector (corporate deposits plus deposits of individuals and households) rose by 37.7% y/y to BGN 35.7 bn (EUR 18.234 bn) at end-October.
2. Insurance Sector
General insurance market grew by 18.8% y/y to EUR 437.7 mn in January-September
Gross premium income of general insurance companies in Bulgaria for the first nine months of the year grew by 18.84% y/y to BGN 852.772 mn/EUR 437.7 mn, according to Financial Supervision Commission data.
General insurers paid claims of BGN 316.85 mn (EUR 162.6 mn), up by 21.83% y/y.
The 19 general insurers reported a combined technical profit of BGN 34.14 mn (EUR 17.5 mn) in January-September, up from BGN 30.1 mn (EUR 15.5 mn) a year earlier, and assets of BGN 1.204 bn (EUR 618 mn), up by 25% y/y.
The general insurance market is dominated by car insurance (comprehensive car insurance and motor third-party liability insurance), which generates nearly 65.97% of the total premium income and 86.2% of total claims.
Gross premium income of life insurance companies rose by 27.43% y/y to BGN 150.346 mn (EUR 77 mn). Life insurers paid BGN 37.785 mn (EUR 19.32 mn) in claims. The life insurers reported a combined technical profit of BGN 10 mn (EUR 5.1 mn) in January-September, up from BGN 4.4 mn a year ago.
Life and accident insurance covers enjoyed the biggest growth in terms of generated premiums and paid claims. Life insurance covers with an investment component also showed a remarkable increase of 24.92% y/y. Among the companies that offer such policies are KD Life, Allianz and DZI.
The premium income of the voluntary health insurance market grew by 29.13% y/y to BGN 20.82 mn (EUR 10.7 mn). Claims totalled BGN 11.2 mn (EUR 5.7 mn), up by 21.71% y/y.
The insurance market in Bulgaria has been growing steadily in the recent years, mainly due to strong income from mandatory insurance policies such as third party liability for motor vehicles.
However, the premium income per capita is still half the average for central and eastern Europe. Bulgaria's EU membership is expected to bolster business activity further and raise personal incomes supporting the growth of the sector.
3. Stock exchange
In November bourse indices fell by 15% and the BSE lost nearly BGN 2.2 bn (8%) of its market capitalisation
Public offerings of CBA Asset management, Enemona and agricultural firm Agria, marked the trade on Bulgarian Stock exchange - Sofia (BSE) in November.
The public offering of the local company CBA Asset management was overbid two times. The issuer holds a minority stake in the retail distribution group CBA and full control in three regional units of the group. The price of the offered 3.9mn new shares reached BGN 3.70 (EUR 1.89) against indicative range of BGN 3.30 to BGN 4.30. CBA Asset management would increase its capital by 24% to BGN 20.2mn with a free float of 19.3%. The market capitalisation of the company set by the ipo price is BGN 74.7mn.
The public offering of the engineering and construction company Enemona was 30 times oversubscribed. The company’s capital was raised from BGN 9.933 mn to BGN 11.933 mn through offering of 2 mn new shares. The placement price reached the maximum possible of BGN 16.80 per share and thus the company attracted BGN 33.6mn. The 2 million shares were allocated among 4100 legal entities and natural persons. More than 8% of the new shareholders in the energy company are foreign investors. The shares in the company are expected to start trading January 8. The free-float will be 16.76% of its capital . Enemona AD is planning to make another raise in capital within 3 years with a free float to reach 25%. The raised funds will finance investment projects of the company in energy, industrial and environment protection as well as debt repayments.
The public offering of the agricultural firm Agria Group Holding was overbid 1.5 times. The holding placed 1.7mn shares at the price of BGN 9.04 per unit for a total of BGN 15.37mn. The newly issued shares account for 25% of the increased shareholders’ capital. The shares were offered under a book-building method in the price range of BGN 9 to 13. The raised funds will finance investment programmes, including construction of a vegetable oil processing unit located in the eastern town of Devnia , in which equipment for manufacturing of 35,000 to 40,000 tons of biodiesel annually will be installed at a later stage.
Bulgaria is third in initial public offerings in central and Eastern Europe, following Poland and Russia, according to data of the investment intermediary Karoll. The strong interest in new companies listed on BSE encouraged the establishment of a specialized ipo fund. In November Karoll presented its ipo Advance Fund. The Fund collected BGN 5 mn over the frist two days of its public offering which was a record in attracting funds during the start day of the collective investment scheme in Bulgaria. The first investors in the Fund are mainly individuals, the pension funds also pay interest. Advans Find took part in ipo of Enemona and is preparing to invest in the privatization of the Romanian “Transgaz” as well as in the ipo of the second largest bank in Slovenia - Nova Kreditna Banka Maribor.
The movements on the BSE over the past two months were the classic correction. The previous months of continuous interest and records led the market capitalization to over BGN 30 bn. From the beginning of the year the blue-chip index SOFIX added 57% to 1952.4 points and the broader BG- 40 tripled its value to 616.5 points as of the end- October. Growth had been fueled by increasing demand from local and foreign investors, tempted by prospects for high yields on the emerging market, which became part of the European Union in January.
In less than a month, the bourse indices fell by 15% and the BSE lost nearly BGN 2.2 bn (8%) of its market capitalisation. At the beginning of November the market capitalisation amounted to BGN 29.1 bn, while on November 27 it was already BGN 26.9 bn. The total monthly turnover accounted for BGN 512.11mn, which was equivalent to a daily turnover of BGN 23.28 mn. In November, the BSE processed 53 575 deals, at an average of 2435 deals a day. This was an increase of 11.68% on the past month and 95.86% on the same month last year.
In November the Board of Directors of the BSE decided to strike BTC off the list of BG 40 and BGTR 30. As well Himco was the other public company expelled from BG 40. In BG-40 their places were taken by First Investment Bank and Kaolin and in BGTR 30 the new company was Fazerles AD-Silistra.
SOFIX and BG-40: 01/02 - 10/12/2007 (
Bulletin ENG 11.07.pdf, 325 Kb
