Political Deadlock Holds Back Growth
BMI is maintaining its low estimate of Bulgaria's 2013 GDP growth at 0.5%, while we have very marginally edged up the growth forecast for this year to 1.6% (compared with 1.5% before). As can be seen we are somewhat unexcited about the outlook. To put that in context, however, there are some positives. These include rising goods and services exports to Europe, rising government spending, and some signs of strength in fixed investment. In fact, we expect GDP growth to trend upwards across the next five years, averaging 3.5% per annum. But before that materialises, there are some significant short-term downsides to deal with. The biggest is political. The ruling centre-left coalition under Prime Minister Plamen Oresharski promises fiscal responsibility and convergence with the European Union. But the centre-right GERB party holds most seats in Parliament and is blocking new legislation. Amid this ongoing political deadlock students and others continue protesting against corruption and the political class in general.
As our economic outlook for Bulgaria remains fundamentally unchanged, we are holding steady the forecasts for the Port of Varna. A small 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 3.9% 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% to 11.124mn tonnes; over the medium term (to 2018) we project an average annual increase of 4.6%.
•2014 Port of Varna container throughput forecast to grow...