BUSINESSES SEE TOUGH YEAR AHEAD, DESPITE FORECASTS

Construction sector expected to shrink to normal levels

Businesses in Bulgaria do not expect improvement in the economic conditions before the second half of the year, a Pari daily's inquiry shows. Although the government revised its 2010 forecast from downturn to slight growth, companies only voice moderate optimism.

Mentality

The difference is to a great extent due to mentality, analysts say. On a corporate level companies may feel the situation is difficult, while the macroeconomic indicators may be improving. If a company has good results but another 100 companies go bankrupt, it is their voice that will be heard, Industry Watch's Lachezar Bogdanov said. Improvement will not be felt at once and by all companies, Centre for Economic Development chairman Georgi Prohaski pointed out.

Sectors

The construction sector will not start recovering before September, Bulgarian Construction Chamber chairman Ivan Boykov said. Until then companies will continue cutting their expenses and laying off staff. The banking sector expects to have its most difficult year in 2010, since effects there are felt after the real sector. Low profits will peak at the end of the year and bad loans will reach 10%, UniCredit Bulbank's Kristofor Pavlov forecast.

Pace

The prevailing opinion is that the economy has hit bottom and is now heading to growth. However, companies will not recover at one and the same pace. Some sectors will develop faster than others but as far as the pre-crisis levels are concerned, they simply cannot be reached. Such is the situation in construction, which will certainly have to shrink to normal levels, Bogdanov said.

Global markets

Economic improvement in Bulgaria will follow the recovery on western markets. Export-oriented companies were the first to see positive signs. The moment the global economy starts growing, we will feel it here, too, Institute for Market Economics' Svetla Kostadinova commented.

Exports started increasing as early as last autumn and now they exceed expectations, Monbat co-owner Atanas Bobokov said. The starter battery manufacturer sells 84% of its output in the EU. The second element on which businesses pin their hopes is the recovery of foreign investment in Bulgaria.

Impediments

Domestic consumption will remain low because unemployment will continue rising for at least another year, analysts and business people are unanimous. Another key problem is the money the state owes businesses. Some sectors also report problematic intercompany payments.

The state is criticised mainly for inefficient administration, lack of transparency and corruption. Specialists are not unanimous on the government's fiscal policy. Some believe that the balanced budget is a sign of stability, while others pointed out that the conservative budget policy stifles the economy.