Bulgarian Construction Industry 2013

In 2013, the Bulgarian construction industry was not able to realize its potential, as the sector growth has been lagging behind. The quarterly statistics does not indicate positive development yet. Further, the moderate growth in some construction segments does not contribute to the improvement of the industry as a whole. Thus, the prospects for the sector still remain bleak.

The consequences of the financial crisis and their impact on the economy continue to cast a shadow over the building industry. This trend reduces the hopes that the state of economic turmoil in the sector will be overcome soon. The risks for the contractors are still high; neither do the overall macroeconomic and financial aspects indicate stability. Another contributor to the negative conditions is the practice of late payments of the public institutions. The municipalities in particular, have accumulated a considerable debt to the contractors, which is severely stampeding the building process. Thus, the construction sector is not likely to improve noticeably by 2014.

The construction industry output for 2013 has slightly outstripped the respective production levels of 2006. In general, the overall expenditures on the acquisition of tangible assets have increased a little. As for the construction industry, the sector has registered a moderate growth of 1.9% in 2013 compared to 2012. Another favorable trend observed recently, is the process of business consolidation.

Regarding the public procurement, in 2013 the government has announced 2,891 calls for proposals for construction works with a total value of BGN 4,392 Mln.  (EUR 2,246 Mln.). Further, the investments in the building sector have been declining for the past four years. Compared to 2012, the FDI in 2013 have declined by 92.3%.

Construction activities in 2013

As of 12.03.2014, according to the Central Professional Register of Builders, the registered construction companies in Bulgaria are 4,446, out of which 4,394 are Bulgarian judicial persons whereas 52 are foreign companies. For the same period, the volume of the deregistered   companies is 596. Regarding the members of BCC, by 11.03.2014, the number of the regular members has reached 1,471 whereas the associated – 26 respectively.

In 2013, the construction sector has contributed to 5.6% of the Gross value added, compared to 6.1% in 2012 respectively. The industry comprises 19,068 companies in total, out of which 95% are small enterprises whereas the rest - medium and large accordingly.

Following the recent declining trend, the construction output in 2013 has contracted by 12.6% compared  to 2012. For 2014, this indicator is estimated to reach slightly over EUR 6 Bln, which corresponds to its volume of 2006.

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The segment building construction has declined by 10.3% compared to 2012. Renovation and retrofitting are considered the most lucrative activities in the field of residential construction, whereas the industrial and  agricultural  building are profitable areas in the nonresidential sector respectively. 

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The engineering construction has contracted by 15.5% in 2013 compared to 2012. The trend in this segment is not expected to change, as it is highly dependent on public procurement and the calls for proposals are insufficient to turn this negative growth around.

The building permits in total have declined by 4.2%, whereas the total floor area has increased by 9.8 %.

The building permits for residential buildings have declined by 2.8%, whereas the floor area has inclined by 12%.

The building permits for administrative buildings have declined by 8.2%, whereas the floor area has inclined by 64.1%.

The building permits for other buildings have declined by 5.3%, whereas the floor area has increased by 6.1%.

The statistics shows that even though less building permits have been issued, the floor area is still growing.

New construction in 2013 compared to 2012:

The new buildings in total have declined by 0.9%

The residential buildings have increased by 0.7%

The administrative buildings have increased by 34.9% compared to 2012

The other buildings have declined by 4.2%

Generally, the new construction segment has declined as a whole, whereas the new residential segment shows positive results.

Building Commissioning in 2013 compared to 2012

Employment

The construction sector contributes to around 5.2% of the total employment in Bulgaria in 2013, whereas the number of the employed builders has declined by 3.5%. The construction labor market is characterized by various challenges: aging employees, drainage of young people, unattractiveness of the building profession, lagging behind education and lack of social support. Practically, the construction education institutions are producing unemployed people.

The unemployed in the construction sector for 2013 comprise 10.6% of the total unemployment, according to the National Statistics Institute. The newly registered unemployed in 2013 are 46 thousand people, which shows a decrease of 8.9% compared to 2012. This positive trend however is mostly due to seasonal factors. Furthermore, according to the analyses of BCC the number of the unemployed is much higher.

The recent trends in the construction industry, described above, are not likely to lead to recovery and stabilization of the sector. Generally, the macroeconomic and the interim prognosis of BCC for 2014 are not positive. In addition, the revival process of the building industry is rather complex. The development priorities of the sector should be as follows:

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Investment in “green economy”

Increased budget for public procurement

Policy measures to support SME-s, which are considered the backbone of the economy

Promotion and attraction of FDI

Sound investment of EU funds

Introduction of preliminary monitoring on public procurement process

Harmonization of the EU Directives and Regulations

Implementation of state support and guaranties when accessing third world markets.