Informes Sectoriales OP - Icex

TOURISM AND RELATED SERVICES IN BULGARIA
The trade deficit and the current account deficit widened considerably in 2005 also
because of the increase in oil prices.
Structural Reforms
According to the annual EC Monitoring Report 2004, structural reforms have been
further deepened in all areas. Reforms of product and capital markets have continued
and are broadly in line with key objectives of the Lisbon agenda. Privatization
has been completed in many sectors. Good progress was made in the sale of remaining
enterprises, for example in the energy sector, although not without setbacks and
delays as regards for example the failed privatization of the tobacco company or the
cancellation of the privatization process for a thermal power plant. Company restructuring
in the network industries has been triggered by the privatization of companies
and the increasing liberalization of markets.
Preparations for the unbundling of the National Electricity Company have started
with the separation of accounting systems for different units. The implementation of
the national program for restructuring the steel industry, adopted in March 2004, is
to be completed by 2007. Progress in its implementation in the last year included the
closure of some steel mills, staff reductions and further investments. In coal mining,
three more coal pits were privatized during the reporting period and preparations for
the privatization of one of the two remaining state-owned mines are under way.
Prices for energy, gas and telecommunication have been fully aligned with costs.
Some cross-subsidization still exists with regard to electricity and heating energy for
households, but should be phased out in 2006. Following tariff increases for rail
passenger services, the gap to full cost recovery levels has been reduced. Market entry
of new firms has been dynamic, but both market entry and exit continues to be
hampered by relatively costly, complex and time-consuming procedures.
Although further reform is required, structurally the Bulgarian economy has developed
considerably. Greater macroeconomic stability has improved in the business
environment and the agricultural sector's contribution to GDP has halved since
1997, with the service industry now dominating.
Financial Sector
The currency board arrangement pegging the Bulgarian lev (BGN) to the euro continued
to contribute to macroeconomic stability. Bank credits to households and
non-financial enterprises expanded again at almost 50% in 2004 fuelling domestic
demand and import growth. The Bulgarian National Bank (BNB) took additional
measures in April 2005 to curb bank credit growth by imposing de facto ceilings on
the extension of new credits. Partly in anticipation of these measures, credit growth
increased again at record levels in the first quarter of 2005, but cooled down significantly
to under 40% until the end of July. Fiscal policy remained stability-oriented.
Due to better than expected revenues, the general government balance ended with a
surplus of 1.3% of GDP in 2004 (based on EU accounting standards, ESA 95) contributing
to the reduction of general government debt to below 40% of GDP in 2004.
Financial mediation has been further deepened both in the banking and nonbanking
sector. Due to the high credit growth rates, bank credits to non-financial
private corporations and households have increased by almost 10 percentage points
to 35% of GDP until the end of 2004. In line with credit expansion, the ratio of deposits
to GDP increased by more than 10 percentage points to over 50%. Despite the
high credit growth, bank performance indicators do not show any obvious deteriora-
Spanish Economic and Commercial Office of the Spanish Embassy in Sofia 8