Bulgaria Pays through the Nose for High Profits

Bulgaria Pays through the Nose for High Profits

After yet another downward spiral of the mortgage crisis - the bankruptcy of the Lehman Brothers and the sale of Merrill Lynch into Bank of America - panic on the financial markets is unavoidable and national economies will for sure suffer significant losses. As for Bulgaria, the natural result of the world recession will be more limited access to bank loans and growing interests rates.

On the other hand, foreign investments will not dry out, the trend is just the contrary. In my opinion, the investments into certain spheres of economy will even grow heavier. The reason is that Bulgaria is implementing priority projects worth even more than the hitherto made investments. Part of the money invested into the Black Sea resorts development, in real estates across the country and stock exchange assets have already been drawn out.

The foreign investments in securities have dwindled by almost a half. The capital spending on the realty market in the mountain resort of Bansko, at the seaside and elsewhere across Bulgaria will also shrink even at a cost of financial losses, because they are not yielding the expected profits.

The big international companies will for sure reduce their net investments into Bulgaria's economy. At the same time, however, the direct foreign investments into huge infrastructure projects that are underway in Bulgaria will be swelling. The Belene nuke and new pipelines alone will swallow several billion euro.

Consequently, Bulgaria may expect heavier foreign investments than those that have been drawn out. So, in the long run even if I expect a slowdown this year, new large-scale projects will set a positive trend. In my estimation, the turndown will be about 20-30 percent this year but the trend will reverse already in 2009, only the structure of the investments will change.

Emil Harsev

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