BULGARIA ECONOMY

Six months after the Covid-19 pandemic forced the world into lockdowns and uncertainties, a fuller picture of its effect on the world economy is beginning to emerge. Bulgaria fared not too bad, according to recent statistical data.

According to Eurostat, in the second quarter of 2020 Bulgaria's GDP fell 9.8 percent in comparison to the same period of 2019. The result is better than in most of the EU, where average GDP fell by 14.4 percent and France experienced a decrease of 19 percent.

Nowhere is the abyss between what Boyko Borisov's GERB says it is doing and what it in fact does so obvious than in the economy of what firmly remains the EU's poorest state. Despite the flamboyant media appearances and the merry assertions by senior GERB officials that Bulgaria is grappling the economic crisis successfully, the country remains bogged down in an economic deadend that seems endless unless new idea, new policies and first and foremost new personalities are brought in as soon as possible.

From bad to worse? According to a poll by Alpha Research published at the end of 2011, the majority of Bulgarians consider 2011 to have been "the worst" since the economic collapse of 1997. In that year, a Socialist government allowed a bunch of banks to go bust, three-digit hyperinflation ran wild, the overwhelming majority of Bulgarians lost their life savings and a few select "businessmen" made a fortune by borrowing in leva whilst repaying in hard currency.

In the third quarter of 2010 the average monthly income of an adult member of a family in Bulgaria decreased by 2.2 percent on a year earlier.

At the moment it is 932 leva, or 466 euros, according to the National Statistical Institute.

80.7 percent of the typical family income was generated by salaries and pensions.

Salaries accounted for 467 leva, or 233.5 euros, of the average income of an adult household member in Bulgaria in the third quarter of 2010. This is a 4.9 decrease on a year earlier.

The crisis was already a fact in Bulgaria at the beginning of 2009, but the owner of an accountancy firm in Gorna Oryahovitsa would deny it even more vehemently than then Prime Minister Sergey Stanishev. "I can't understand what crisis they're talking about. I have enough work, clients are paying their bills and the mince in the shop is cheaper," he said. A journalist from Varna shared his opinion: "I am earning more than ever.

Rays of hope have started to peep through the cloud-covered economic horizon – even in the new EU member states. Poland has managed to avoid going into recession. The Baltic states, which were on the verge of collapse until recently, have recorded a slight but encouraging restoration of productivity. The European Commission included Estonia and Bulgaria in the top five EU countries with the greatest financial stability.

At first, they stopped buying. Then it got worse - they started selling. Yes, it seems the British have deserted the Bulgarian property market and the Bulgarians are taking it very personally. The situation is grim all over the country, even in top spots and villages regarded as "British" for years.

DID WE SEE IT COMING?

"The Bulgarian economy is stable." The words former Finance Minister Plamen Oresharski uttered in October 2008 seem more than just a little out of place a year later. The economic crisis is in full swing and, according to the most optimistic forecasts, will reach its peak from October to December 2009.

While last autumn the prevailing opinion of people in this country was that the economic crisis did not have a direct effect on them, their view is now completely different. Nearly half of them say that the crisis has entered their homes, in one way or another. This is what a series of surveys conducted by the Open Society Institute show about the impact of the country's economic situation on Bulgaria's population.

The commercial real estate market in Bulgaria is at a crossroads. All of the three commercial sectors – offices, retail and industrial – have felt the impact of the global economic downturn that started to affect Bulgaria during the last months of 2008 and continues this year.

The slowdown has hit quite differently across the various sub-segments, depending on the stages of development. The question now is how we choose to manage the situation, and what will take off when the light changes to green.

The "monster munch," as Londoners call the current credit crunch, in my view is running out steam. Everyone is growing tired of the pundits.

The real crisis started in August 2007, but times have been changing since. Yes, it was a real crisis, and yes, many global banks were fatally wounded, including some of the most venerable names in modern banking.

According to a saying very popular among Bulgarians in the past, "In his life, a man must do three things: raise a child, plant a tree and build a house for his family." Nowadays this way of thinking no longer reflects the urban lifestyle – the current ratio of houses to apartments in most cities is approximately 20:80. In Sofia it has reached 10:90.

The year 2008 taught the world a bitter lesson – in economy terms, we're all in the same boat. No country is safe from the effects of a global crisis. During 2008 most players on the Bulgarian property scene were still in denial about the pending meltdown, hoping they could somehow avoid it. Now that the crisis is offcially here, what's to be expected? The property market and its various sectors will continue to change dramatically as certain crisis-related phenomena appear that we all will have to deal with.

The mortgage mafia

Is the property boom a bubble on the point of bursting? While Bulgarians fretted over this question for the past year, the global economic "downturn" became a "crisis." The question now is whether Bulgaria has managed to dodge the bullet, as many experts would have us believe. If this were so, why has the property market in 2008 been much less dynamic than it was a year earlier? And is the British pullback to blame?

THE FOREIGN FACTOR

Expect the unexpected

Bulgarians who hold hefty mortgages may receive an unpleasant Christmas present from their banks, as yet another increase in interest rates on home loans is just around the corner. According to credit experts, rates will soon rise by 0.5 to 1 percentage point. Some banks have already pushed up their interest rates by almost 2 percentage points this year, and the base interest rate has reached 5.33 percent, its highest level in 10 years. Will credit holders manage to pay their debts or is a wave of US-style defaults imminent?

In July a Bulgarian bank approved a 500,000 euro mortgage for an apartment in Sofia. To repay the loan, in the next 25 years the "lucky" borrower will pay monthly instalments of 3,500 euros. The media has been touting this record loan as an example that Bulgaria has successfully avoided the repercussions of the global credit crunch. But is this a fact or just wishful thinking?

In 2006 a building at 39 Alabin St, in Sofia's centre, collapsed and killed two young women. Surprised such an appalling accident could occur in the 21st Century? That's only the beginning.

The experts have got it wrong. In 2008, Ruse and Plovdiv have the fastest growing property prices having knocked Sofia off its perch. The most promising holiday sector – spa centres – have gone down the toilet. The logistic and industrial property segment, touted as the next big thing, with Bulgaria harbouring ambitions to become a world-class logistics hub, have badly underperformed. Where did it all go wrong?

Grey, Socialist buildings became dwarfed by skeletons of colourful resort complexes-to-be as construction in Bulgaria boomed in the mid-2000s. Empty beaches and ski retreats gave birth to literally hundreds of buildings promising to be off-plan bargains, high-rental yields and unmissable business investments.

Climate change, Al Gore, stranded Polar bears or your last inflation-exceeding electricity bill. These are some of the things that come to mind when people mention solar energy. And mostly the conversation then continues in theoretical terms.