Boston, MA -- (SBWIRE) -- 01/07/2014 -- Political Uncertainty Is Holding Back Bulgarian Growth

If it weren't for the politics, after a period of fiscal austerity and the eurozone crisis, the Bulgarian economy would now be more than ready for a pretty impressive recovery. But politics have intervened on the downside. A deeply unhappy and angry electorate forced one government out of office earlier this year and has put its successor under threat of further big protests and upheavals. Not surprisingly, the centre-left coalition under Prime Minister Plamen Oresharksi - which prefers to call itself 'technocratic' - is proceeding with extreme caution. Some stimulus is being injected into the economy through an improving performance from net exports, together with the government's decision to reverse utility price increases and to allow the fiscal deficit to widen a little. But against this, high levels of political uncertainty have descended like an anaesthetic cloud on the country's economy, paralysing household consumption growth and putting investment on hold. In this context, BMI is holding to its previously stark predictions. Confirmed, in our view, by weak Q213 data, we predict GDP growth of only 0.5% this year, rising to 1.5% in 2014.

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Since the economy has been almost at a standstill in 2013, we have trimmed back some of our estimates for the Port of Varna in that year. A recovery will make itself felt in 2014 as both gross tonnage and box traffic are set to rise at above-GDP rates. This is in part explained by a more promising outlook on the trade front: measured in real terms, 2014 trade will grow by 5.5%, up from an estimated 4.8% in 2013. Over the medium term, plans to concession the port's container operations offer upside risk. We highlight that there has not yet been any interest in this, and the country's privatisation drive is centred on concessioning ports on Bulgaria's part of the Danube River instead.

Headline Industry Data

- 2014 Port of Varna tonnage throughput forecast to grow 5.3%; over the medium term (to 2018) we project an average annual increase of 4.6%.
- 2014 Port of Varna container throughput forecast to grow 6.0%; over the medium term we project a 6.7% average annual increase.
- 2014 total trade growth forecast at 5.5%.

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