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Bulgaria Infrastructure Report Q3 2011
Business Monitor International, June 2011, Pages: 62
Business Monitor International's Bulgaria Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Bulgaria's infrastructure industry.
BMI View: A continued contraction in the Bulgarian construction market in Q111 has further dampened our outlook for recovery over the period 2011-2015. Although we see considerable return in investor sentiments in Bulgaria, we believe that sluggish private demand and the public sector’s fiscal constraints to fund infrastructure projects will impede robust recovery in the segment. Estimates from the Bulgarian National Statistics Institute (NSI) indicate that much of the slowdown in Bulgaria’s construction segment during 2009 and 2010 was a result of suspension of real estate construction in the country. The trend continued well into 2011, with monthly construction output reporting declines of 14% to 19% y-o-y between January and March.
This pessimism has prompted us to downgrade our forecast for the construction segment real growth from 2.9% real growth expected earlier to a muted 1.3% in 2011. However, we expect to see a return to more robust growth from 2012 – at an average rate of 2%, on the back of the following factors:
- Our Macroeconomic team expects fundamental improvements in Bulgaria's economy with 2011 real GDP growth expected to reach 2.6% y-o-y. Much of the outturn in the final quarter of 2010 was driven by continued strong demand from Bulgaria's external markets and we expect this to lead to renewed investments in Bulgaria.
- Both the commercial property market (retail and office space) and the residential real estate markets should receive significant support from the recovery in real economic output, amid an improved outlook for commercial investment, consumer demand and disposable incomes.
Upgrading its railways has become a national priority for Bulgaria, not only to improve the links between Asia and Europe, but also to enhance the competitiveness of the Bulgarian railways and enable integration with the European rail system. To that, the government signed contracts for about 80% of the funds allocated for railway infrastructure projects under the European Union's Transport operational programme in May 2011. A major proportion of this funding is to be utilitised towards development of the three major projects under the programme,: the Plovdiv - Svilengrad, Septemvri- Plovdiv and Plovdiv - Bourgas railway sections.
In the energy sector, Dutch power firm Infinity Energy Holding has announced plans to build a 5MW solar power installation in Bulgaria. The installation, to be located in Devnya, will be the first part of a wider project and is expected to cost EUR50mn (US$71mn). It is scheduled for completion by the end of 2011.
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