21 November 2007 Newsletter

Bulgaria shrugs off global credit crisis

Home owners in many parts of the world have reason to worry about the implications of the international credit crisis. In Bulgaria, they do not.

Bulgaria's residential property market is showing unexpected resilience thanks to investment by east Europeans and increasing numbers of local buyers.

Interest from foreign investors remains high, as they are aware that Bulgaria still has the lowest property prices in the European Union.

Investors from Russia and Romania have started to replace the British and Irish buyers who were the first to put the Black Sea Coast, Pamporovo, Bansko, a ski resort south of Sofia, on the international second-home map. The credit squeeze has had an impact mainly in the US and the UK, while the market in the past six months has been driven predominantly by investors from Russia, Romania, Poland and Ukraine.

Russians and other east Europeans, who filled Bulgaria's Black Sea resort hotels in the communist era, are returning as buyers of holiday homes. Estate agents say sales to east Europeans, whether of low-priced apartments or high-end villas in gated developments, have shown a significant increase this year. "I chose Bulgaria because it's close enough to drive to if I want, and I feel at home - all the older people speak Russian. And it was affordable, unlike the prices here," says Pavel Sinelnikov, a businessman in St Petersburg who bought a two-bedroom apartment at Golden Sands, the second-largest Black Sea resort.

Bulgaria's strong economic growth in the run-up to EU membership, averaging more than 5 % annually, has pushed up incomes for private-sector workers.

Mortgages are widely available from the local subsidiaries of Italian, Greek and Austrian banks. According to the Bulgarian Central Bank, property purchases in the first eight months amounted to €1.16bn ($1.7bn, £808m), equivalent to about 35% of total foreign direct investment since Bulgaria joined the EU last January.

Bulgaria's property boom was initially driven by investors from the UK and Ireland, attracted by affordable prices for newly built second homes and one of the lowest costs of living in Europe.

The capital Sofia, along with the port of Varna on the Black Sea Coast, is seeing steady population growth as skilled workers migrate from provincial Bulgarian cities.

The supply of residential properties is growing fast, but demand is stronger still. Prices have risen 13-18% this year.

Overall, the city market looks strong as prices are still 20-30% less than other comparable east European cities, and there is a growing local market looking to buy in better areas, in developments with more facilities.

Excerpt from The Financial Times
By Kerin Hope and Theodor Troev
10 November, 2007

Projects to construct ring roads by Aheloy and Sunny Beach about to be launched soon

Sofia-based company VIP has won the competitive tender for the design of two ring roads by Aheloy and by Nessebar in the direction of Sunny Beach – with the purpose of negotiating the traffic congestion in summer. Each of the projects is worth BGN 80 000.

The construction of the ring road by Aheloy will be much more difficult. Three large road facilities and a greater number of lanes will be built in order to negotiate the heavy traffic in the region.

As traffic near the Sunny Beach resort is less congested, only one road facility and fewer new lanes will be built.

Building & The City Weekly
By Milena Vasileva
22 – 28 October 2007

The EU grants €25,000 for opening up a farm

FROM 40-75% SUBSIDIES WILL BE GRANTED FOR THE MODINISATION OF EXISTING FARMS IN BULGARIA

Bulgarian farmers will be granted a total of EUR 1204 billion for improving the competitiveness of their farms by 2013. The money will be allocated under the programme for the development of the EU agricultural regions.

Brussels will grant a total of EUR 963.89 million; another EUR 240.97 million will be granted by the Bulgarian government.

24 Hours Daily
By Tihomir Tonchev
12 November, 2007

Business Europe: Bulgaria 2007 – 2009 GDP established at 6.5%

The Bulgarian economy will post real GDP growth of 6.5% annually through 2009, said the Economic Outlook Autumn 2007 report released by Businesseurope, a confederation of European businesses.

The country's annual inflation will remain relatively high compared to other states in the region. It is forecast at 8% in 2007, 8% in 2008 and 7.5% in 2009.

According to the report, the EU new-comer is poised for a vigorous economic growth over the next couple of years. To view the report, click on - www.businesseurope.eu/economicoutlook - then on Bulgaria.

Dnevnik Daily
12 November, 2007

Bulgaria ranks second by the size of foreign investment in Southeastern Europe

INVESTMENT GROWTH OF 40% IS EXPECTED IN 2007

to $ 3.862 billion in 2005. Thus the country ranks second in the region of Southeastern Europe after Romania ($ 11.394 billion) and before Croatia ($ 3.556 billion).

The total value of the foreign investment flow in the region in 2006 was $ 26.348 billion against $ 15.123 billion in 2005.

According to the World Report on investments for 2007, the flow of direct foreign investments in the countries of Southeastern Europe and the Community of Independent States grew by 68% in 2006 and reached $ 69 billion for the sixth year in succession.

The report points out that the size of foreign investments will keep on growing in the Russian Federation and the Ukraine, as well as in the newest EU member states Bulgaria and Romania.

It is worth mentioning that Bulgaria ranks seventh in the world by the incoming flow of direct foreign investments after Luxemburg, Hong Kong, Surinam, Iceland, Singapore and Malta; it ranks third in the EU and is ahead of countries like Estonia.

This classification is based on the inward FDI performance index which is related to the size of direct foreign investments in an individual country. The World Bank research project 'Doing Business 2008' puts Bulgaria among the first ten reformist states in the world.

Interest in real estate investments in Bulgaria keeps on growing; their share in the foreign investment flow for the first eight months of 2007 has been 35%.

Investment Advantages of Bulgaria

• EU membership
• Good investment location
• Macroeconomic and financial stability
• High investment rating ensured by the largest loan companies S&P
• Stable and predictable business environment
• Low profit tax of 10 % - the lowest in the EU
• Qualified workforce at a competitive price
• Low operating and production costs

Direct Foreign Investments by Years (in $ million)

Building & The City Weekly
By Nikolai Todorov 22 – 28 October 2007

Country	1990-2000 (Average annual rate)	2003	2004	2005	2006
Bulgaria	306	2097	3452	3862	5172
Romania	656	2213	6517	6483	11.394
Croatia	543	2049	1227	1790	3556
SE Europe	1610	8424	13.388	15.123	26.348
Global	495.399	564.078	724.143	945.785	1.305,852

Building & The City Weekly
By Nikolai Todorov
22 – 28 October 2007

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