For the last four years foreign direct investments have stood at around 3% of GDP, reaching 1.1 – 1.2 billion euro;

In the second quarter of 2014 in real terms the export of goods and services is already above its peak of six years ago;

There is a significant improvement in the demand in the agricultural sector, the export-oriented part of some sectors, the business services and the industry.

Foreign direct investments remain very important to the modernization of the Bulgarian economy but their role is changing. This is a conclusion made by Levon Hampartzoumian, CEO of UniCredit Bulbank and President of the Association of Banks in Bulgaria during his participation in the Forbes CEE Forum in Bucharest. He explained that foreign investments used to be a source of funding for states where domestic savings were limited, Bulgaria included. Today there is already a clear trend of change in the role of foreign direct investments as a source of know-how, new technologies and new management practices.

"Only a few years ago Bulgaria had a period of rapid growth in the volume of foreign direct investments, which was much higher than in some CEE countries", Levon Hampartzoumian explained. In Bulgaria, however, most investments were concentrated in the non-manufacturing sectors of the economy, especially in the real estate and construction sectors, which in their turn led to an unhealthy growth in the field. For comparison other countries such as the central European economies - the Czech Republic, Slovakia, Poland and to a lesser extent Hungary - attracted smaller volumes of foreign direct investments which were however concentrated into the export-oriented part of manufacturing. In this way the manufacturing capacity of these countries increased.

For the last four years foreign direct investments have stood at around 3% of GDP, reaching 1.1 – 1.2 billion euro. Data shows, however, that the structure of investments has improved considerably.

"Already one third of foreign direct investments is channeled to manufacturing, another third to the energy sector, and the rest is shared between commerce, transport, construction and agricultural sectors", Levon Hampartzoumian further analyzed.

An essential factor for the recovery of the Bulgarian economy is undoubtedly export. In the second quarter of 2014 in real terms the export of goods and services is already above its peak of six years ago. The export of raw materials, however, reaches 40% of the total export of goods and in 2014 it is almost unchanged from its levels at the beginning of the 21st century.

Further to being a sign of lagging behind of the economy, the big share of raw materials in the export structure is a problem because there are no conditions for creation of new jobs", further says the analysis presented at the Forbes CEE Forum in Bucharest. Another weakness of the Bulgarian economy was said to be the high indebtedness in the real estate and construction sectors, which will continue to burden the pace of economic recovery in the short- and mid-term plan.

According to the latest analysis by the economic team of UniCredit Bulbank, there is a significant improvement of demand in the agricultural sector, the export-oriented part of some sectors, the business services and the industry. However, these are more willing to rely on inter-company indebtedness rather than increasing their exposures to banks.

"The post-crisis economic environment is characterized by a greater complexity and a more limited supply of capital", commented the CEO of UniCredit Bulbank. He further explained that the growth potential was limited even more by the loss of manpower and a certain increase of emigration. "Today the banks in CEE are facing the challenge of having to manage risks better than ever and working with stronger capital and liquidity buffers", Levon Hampartzoumian analyzed the situation in the region. According to him, the banking sector needs to focus on the development of SMEs and on the agricultural sector, which have the potential to be the trigger of economic growth. Levon Hampartzoumian drew a comparison between the Romanian and the Bulgarian banking sectors, pointing out that they had similar problems but in either country banks could not be the driver of growth, they could only follow it.

More information for media:

UniCredit Bulbank, Identity & Communications Department

Ekaterina Ancheva, Phone: + 359 2 9264 963, flbufsjob/bodifwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch