Bulgaria Infrastructure

Sitting on the outskirts of the EU, Bulgaria's investment environment has been badly dented by lack of confidence in the wake of the eurozone crisis. Reticence from the private sector, combined with endemic corruption and constraints in the public sector, amount conspire to impede recovery and dampen prospects of increase. The sector is estimate to stand at US$3.7bn in 2012, with year-on-time(y-o-y) increase of only 0.5%. The sector is expected to reach US$ 4.7bn by 2021, with annual average increase of 1.6% between 2013 and 2021.

Key developments :

Ming Yang Wind Power International was awarded an engineering, procurement and construction (EPC) contract for Bulgarian 125MW wind farms. Ming Yang announced that it had already shipped the first batch of turbine generators to the new 4.5MW pilot wind project at Somovit. Ming Yang CEO and chairman Chuanwei Zhang said that the contract represents a milestone in the company's expansion into the European renewable energy market. The first wind farm in Milkovitsa is scheduled to be operational by H212.

The Bulgarian Environment Ministry announced that it had been awarded funding worth a total of BGN98.6mn (US$65.8mn) by the EU Operational Programme 'Environment'. The money will be used to finance the construction and upgrade of three wastewater treatment plants in the country. BGN48mn (US$32mn) will be spent on modernising the Golden Sands plant on the Black Sea, BGN32mn (US$21.4mn) will be used to reconstruct the Albena plant (as well on the Black Sea), whilst BGN18.6mn (US$12.4mn) will fund the construction of a 22km water supply and sewerage network, inclunding the expansion of the plant at Tervel in the northeast of the country.

Bulgaria's ruling party is likely to continue facing significant challenges in 2012, particularly as the government struggles to combat high levels of corruption, and rising ethnic tensions. We believe that minimising internal party frictions will be vital in the face of tougher economic conditions, which could provide a weak opposition with an opportunity to gain ground. The lack of a decisive resolution to the eurozone sovereign debt crisis will continue to weigh on Bulgaria's economic outlook, dragging on the country's trade, investment and consumption outlook.

We have revised down our Bulgarian real GDP increase estimate for 2012 and 2013 to 1.1% and 2.3%, from 2.5% and 2.7% respectively. We believe that the unsustainable credit boom prior to the world financial crisis, which has left the private sector heavily indebted, will leave an indelible mark on Bulgaria's longer-term economic outlook. Insufficient productive investment in previous years and next private sector deleveraging will likely see the economy grow at around half the pace as before the crisis hit.