Bulgaria faces negative growth again

16 January 2012

A third consecutive year of negative growth for the Bulgarian construction sector is expected from 2011 figures, according to economic research firm Buildecon.

It said that, in 2011, the Bulgarian gross domestic product (GDP) was predicted to show a surge of 2.0% to 2.5%.

However, compared to the overall economy, the Bulgarian construction sector was still lagging behind in its revival. Buildecon said the pace of the slide was slower than in 2010 and 2009, and that the bottom would be hit in 2011 at around €7 billion for construction output ­- at current prices - and the sector would to start to rebound in 2012.

It forecast that in 2012, the civil engineering share would exceed 50% of the total output. The leading segment would again be road construction, as a result of large-scale infrastructure projects financed through the EU Programmes and renovation initiatives funded by municipalities.

In the period 2012/2013, civil engineering is to compensate for the downturn of other sub-sectors, since the government is planning the highest absorption rates in EU funding for these two years. Residential construction might be triggered only by some renovation activity in 2012/2013, while the leading segment in non-residential construction is to be industrial construction, according to Buildecon.

In the residential sub-sector, the trend during the crisis years was away from massive multi-family complexes and towards individual small-scale projects. Investors faced low demand and difficulties in finding financial resources. Homebuyers were attracted by decreasing property prices, but at the same time, they were halted by the economic uncertainty and the risk of losing future incomes.

Bulgarian non-residential construction saw an unstable year as well. No major projects reached completion in first half of 2011, especially in the three leading sectors -commercial, office and hotel construction.

Nevertheless, Buildecon said forecasts for shopping centres in the years 2012 and 2013 were more optimistic, with a number of new malls to be completed. It said existing properties were characterised by higher vacancy rates and dropping rent levels, which might restrain eventual future investment incentives.

As a result of postponed modernisation and the available EU support, the upcoming period is to experience growing activity in the field of industrial and agriculture-related construction, said Buildecon.

In civil engineering, the construction of transport infrastructure registered the highest volumes in 2011. The most serious developments resulted from the government's ambition to build a transport network to modern standards, including highways, express roads, rehabilitated existing national roads, railway and subway links.

Environmental projects are also to be highlighted in years to come, as by the end of 2011 their completion and implementation were unsatisfactory, according to Buildecon.

The number and significance of green projects is rising, and Bulgaria is a partner in many international initiatives. In 2011, there were no international energy projects in which Bulgaria participated, though administrative procedures are being gradually overcome and the real start of construction works is projected for mid-2012, it said.

Buildecon provides sector forecasts and analysis on eight east European countries - Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Ukraine and Turkey.

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