BMI View: Bulgaria's construction industry will grow by 0.3% y-o-y and 1.4% y-o-y in 2015 and 2016, respectively, supported by the transport infrastructure sector, particularly projects in the road and railway subsectors. Although Bulgaria will continue to be highly dependent on EU funding for infrastructure development , we have started to note increased international interest in this market.
Latest Updates And Structural Trends
Driven by transport infrastructure projects, we forecast Bulgaria's construction industry will grow by an average of 2.0% over 2015-2024. However, infrastructure projects will continue to face challenges in securing financing.
Bulgaria remains highly dependent on EU funding for infrastructure projects, particularly in the transport sector. As such, slow EU recovery will limit the speed of Bulgaria's transport infrastructure growth.
Improved absorption of EU structural funding will be supported by public investment projects to a certain extent.
As approved by the Bulgarian government on September 16, 2015, the country plans to build 635km of motorways and repair 17,000 of existing main and secondary roads by 2022 (Novinite, 2015).
Growth in Bulgaria's energy and utilities sector has been subdued due to fiscal constraints and a lack of consistent foreign competition and skills. The sector faces a slow path to recovery, particularly now that construction of the South Stream pipeline has been cancelled.
We do not expect investment in renewable energy infrastructure to increase in the coming years given the Bulgarian government decided to terminate incentives for new renewable energy capacity in March 2015.
Last month, Bulgaria's PM Boyko Borisov declared that up to 30bcm of gas could be transferred via Bulgaria through the interconnectors with Greece, Turkey and Macedonia when they are built and the capacity of Chiren underground gas storage facility is expanded (Novinite, 2015).
On October 28, 2015, Bulgaria's government decided to issue guarantees worth BGN215mn (EUR109mn) for the IGB project in 2016. On November 9, 2015, the country's Energy Minister Temenuzhka Petkova stated that only a date is to be set for the signing of the final investment decision on the IGB project (Novinite, 2015).
The outlook for the residential sector is not positive, especially from 2019 onwards. The housing market remains extremely weak following a collapse in prices since 2008 and the high levels of indebtedness will act as a headwind to future investment.
On October 12, 2015, Germany's KfW Development Bank signed a letter of intent with the state-owned Bulgarian Development Bank (BDB) to lend EUR100mn to finance government programme for boosting the energy efficiency of multi-family residential buildings. The negotiations are expected to be completed by the end of November 2015. BDB received the approval from EIB for a EUR400mn funding (Novinite, 2015).
|f = BMI forecast. Source: National Statistical Institute of Bulgaria, BMI|
|Construction industry value, BGNbn||3.30||3.40||3.40||3.48||3.60||3.76||3.92|
|Construction Industry Value, Real Growth, % y-o-y||1.10||-2.60||0.30||1.37||1.68||2.35||2.57|
|Construction Industry Value, % of GDP||4.1||4.1||4.1||4.1||4.1||4.1||4.2|
Bulgaria scores 49.0 in our Infrastructure RRI, declining from the score of 51.9 in the previous quarter.
Compared to the regional average of 47.6, Bulgaria scores poorly (37.0) in Industry Rewards, with the country's performance undermined by the small absolute size of its infrastructure market and the sector's limited growth prospects.
The retendering of contracts for highways has revealed deep-rooted problems and inconsistencies in the concessionary framework for infrastructure projects. As a result, Bulgaria's score of Industry Risks languishes at 35.0, the same score with the previous quarter, 34 points below the regional average of 69.0.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Bulgaria Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Bulgaria Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Bulgarian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Bulgaria to test other views - a key input for successful budgetary and planning in the Bulgarian infrastructure market.
- Target business opportunities and risks in the Bulgarian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Bulgaria.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.