Bulgaria headed for two-year recession – BNP Paribas

The Bulgarian economy will be in the depths of a recession in the next two years with dwindling capital inflows and consumption squeezed by the rising jobless rate, forecast BNP Paribas economist Michal Dybula, a co-author of a report on 2009 global economic outlook.

Neighbouring Romania is also in for big trouble with GDP set to drop 0.6 per cent next year, according to the French lender.

The Bulgarian economy will contract 1.2 per cent in 2009 and 0.3 per cent in 2010.

Economic growth will slow down to 2.2 per cent in Q4 2009 from 4.4 per cent in the final quarter of 2008.

The Bulgarian economy is the most rickety across all Central and Eastern Europe, Dybula said in a separate report on the region.

The wide current account gap is the major challenge before Bulgaria in the face of slowing foreign capital inflows.

The expected protracted recession in the eurozone will freeze cash flows to the region and slash jobs of Bulgarian and Romanian migrants making it harder to send money back home and rising domestic unemployment if they return.

Timothy Ash, head of emerging markets at the Royal Bank of Scotland, told Dnevnik the economy will slow down to two per cent and a negative value should not be ruled out either.

Property funds grappling with tight funding

Bulgarian property funds developing or prepping to start projects are facing financial difficulties, market representatives told Dnevnik. The global economic doldrum has dampened demand and frozen prices on the property market, where some segments are even seeing downward price revisions.

The next six months would be hard for real estate investment trusts (REITs) that are yet to raise funding, executive director of Intercapital Markets, the consultant of Intercapital Property Development, Nicolay Mayster said.

REITs are facing tighter access to both equity and bond capital, said Yassen Ivanov, portfolio manager of DSK Asset Management, which manages mutual fund DSK Properties.

The bulk of Bulgaria’s listed property funds have not given up current projects, most of them started at least a year ago, but few are daring to start fresh projects.

The worsening global market conditions have pulled foreign investors out of Bulgarian properties and into undervalued assets in other parts of Europe, according to FairPlay Properties investment manager Raycho Dyankov.

The consensus among analysts, however, is that the property market crisis has a silver lining. The crisis will sift out experienced companies with good management and investments, said Ivanov.