Erste Group Bank AG, one of the four biggest lenders in the former communist part of Europe, keeps Bulgaria in its plans, but in the longer term, its chief executive has said.

“If we look into the long term, the market we have to move into urgently – and urgently means for me sometime in the next 25 years – is Poland,” Chief Executive Andreas Treichl said in response to a question after a meeting of the shareholders on Tuesday.

“Afterwards we will probably relatively soon get into Bulgaria. At the moment we have no expansion plans in this direction.”

In his words Ukraine remains a “very interesting market” for the long term.

Andreas Treichl praised Ukraine‘s commodity wealth and geography, but voiced concerns over the lack of political stability in the country.

UniCredit SpA, Erste Group Bank AG, Raiffeisen Bank International AG andSociete Generale SA are the four biggest lenders in the former communist part of Europe.

The Bulgarian banking system is concentrated, with most of the assets owned by large financial institutions from the eurozone.

The five biggest banks in Bulgaria are UniCredit Bulbank; DSK Bank, a unit of OTP Bank Nyrt., Hungary’s largest bank; United Bulgarian Bank, owned by the National Bank of Greece SA; Raiffeisenbank Bulgaria and Eurobank EFG Bulgaria.

Greek banks control about 28% of banks‘ total assets in Bulgaria.

Bulgaria has registered an increase in its foreign direct investment in January-March 2012 year-on-year, according to the latest data of the Bulgarian National Bankreleased Wednesday.

According to preliminary data, the Foreign direct investment in Bulgaria for January – March 2012 amounted to EUR 236.8 M (0.6% of GDP), compared to a negativeFDI of EUR 42.2 M (0.1% of GDP) for January – March 2011.

Bulgaria’s attracted Equity Capital (acquisition/disposal of shares and equities in cash and contributions in kind by non-residents in/from the capital and reserves of Bulgarian enterprises and receipts/payments from/for real estate deals in the country) for January – March 2012 amounted to EUR 180.3 M.

It decreased by EUR 51.9 M compared to the equity capital attracted in the same period of 2011 (EUR 232.2 million).

Bulgaria’s receipts from real estate investments of non-residents amounted to EUR 44.9 M, up from EUR 37 M attracted in January – March 2011.

The other capital, net (the change in the net liabilities of the direct investment enterprise to the direct investor on financial loans, suppliers’ credits and debt securities) was positive, amounting to EUR 38.6 M in January – March 2011, compared to a negative other capital, net of EUR 299.3 M in January – March 2011.

Based on preliminary data on profit/loss, Bulgaria’s Reinvested Earnings (the share of non-residents in the undistributed earnings/ loss of the enterprise) in January – March 2012 were estimated at EUR 17.9 M, compared with EUR 24.8 M in the same period of 2011.

By country, the largest direct investments in Bulgaria for the period January – March 2012 were those of the Netherlands (EUR 257.1 M) and Switzerland (EUR 98.4 M).

Bulgaria’s largest negative investment flows for the period were towards Germany (EUR -152.3 M), Greece (EUR -61.8 M) and UK (EUR -49.9 M) mainly due to net payments on intercompany credits in accordance with the loan repayment schedules of enterprises.

By branch, Bulgaria’s largest investments for January – March 2012 were in Electricity, gas and water supply (EUR 118.9 M). Bulgaria’s largest net payments in the reporting period were in Real estate, renting and business activities (EUR -35.2 M).

According to preliminary data in January – March 2012, Bulgaria’s direct investment abroad increased by EUR 20.7 M, compared to EUR 44 million in January – March 2011.

Household spending in Bulgaria increased by nearly 15% in the first three months of 2012 compared to the same period in 2011, according to data of the National Statistical Institute (NSI).

Meanwhile, household incomes increased by 10.6% in Q1 2012, compared to Q1 2011.

Spending on food and housing accounted for over 52% of the total spending.

According to statistics for the period January-March 2012, average household per capita income was BGN 960, while the total expenditure per household member was BGN 888.

Wages and salaries remained the main source of household income in Q1 2012, registering  an increase of 8.8% on the year.

Wage and salary income per household member in the first three months of 2012 amounted to BGN 500 on average.

The second most important source of income was pensions, which went up by 1.5% year-on-year to an average of BGN 289 per capita.

Food and soft drinks spending increased by 5.4% to an average BGN 299 per household member in Q1, 2012.

Alcohol and tobacco products spending increased by the dramatic 22.4% year-on-year to BGN 39 per capita in the first three months of the year.

The Gross Domestic Product, GDP, in Bulgaria in the first quarter of 2011 increased by 0.5%, compared with the same quarter of the previous year.

GDP remains at the same level compared to the fourth quarter of 2011.

These flash estimates were released Tuesday by the Bulgarian National Statistics Institute, NSI.

According to the flash GDP estimates for the first quarter of 2012, the GDP at current prices amounted to BGN 15 661 M.

Bulgaria’s Gross Value Added, GVA, at current prices amounted to BGN 13 358 M. The services sector have the largest share (63.7%) in the total value added, followed by industrial sector (32.3%). The agricultural sector constitutes 4% of the value added in the total economy.

In the structure of GDP by the expenditure approach, final consumption (86.9%), which in nominal terms amounted to BGN 13 612 M, has largest share in GDP. In the first quarter of 2012 the Gross Fixed Capital Formation is BGN 3 346 M and has a share of 21.4% in GDP. The external balance (exports minus imports) was negative.

According to the seasonally adjusted data, the GDP growth rate in the first quarter of 2012 remains at the same level compared with the previous quarter

According to the seasonally adjusted data, in the first quarter of 2012 the Gross Value Added of the total economy decreased by 0.4%, compared to fourth quarter of the previous year.

The GDP growth rate in the first quarter of 2012 remains at the same level compared with the previous quarter

According to flash estimates of GDP by final expenditure, the Final Consumption Expenditure increased by 0.2% in the first quarter of 2012. For the same period, the Gross Fixed Capital Formation increased by 2.5%. In the first quarter of 2012, the exports of goods and services decreased by 4.6%. During the same period, imports of goods and services decreased by 2.4% over the previous quarter.

During the first quarter of 2012, GDP increased by 0.5% compared to the same quarter of the previous year. Gross Value Added decreased by 0.3% compared to same quarter of previous year. The indicator’s movement is determined mainly by the increase recorded in the agricultural sector (12.4%) and industry (2%). Services have a negative contribution to Value Added with a decline of 0.8% over the period.

Regarding the expenditure component of GDP, a major contributor to registered positive economic growth of 2.2% is final consumption. Gross Fixed Capital Formation recorded a decrease of 3.4% compared to the same quarter of the previous year. Exports and imports of goods and services decreased respectively by 1.9% and 1.6% compared to the corresponding quarter of previous year.

The Eurostat (the statistical office of the EU) defines a flash estimates as: „…the earliest picture of the economy according to national accounts concepts, which is produced and published as soon as possible after the end of the quarter, using a more incomplete set of information than that used for traditional quarterly accounts…”

Flash estimates for GDP are based on the preliminary available monthly and quarterly indicators for the components of GDP structure (subject to subsequent update and revisions).

Flash estimates of GDP for the first quarter of 2012 were prepared within 45 days after the reference period. They are presented in a standard format for publication of quarterly national accounts data – current prices, relative shares of the components in the GDP structure and growth rates as compared with the previous quarter and compared with the same period of the previous year.

According to the Calendar of statistical surveys, NSI will prepare and publish official quarterly estimates of GDP for the first quarter of 2012 on 6 June 2012.

The consumer price index (CPI) in Bulgaria in April 2012 compared to March 2012 was 100.2%, i.e. the monthly inflation was 0.2%.

The inflation rate since the beginning of the year (April 2012 compared to December 2011) was 1.6% and the annual inflation in April 2012 compared to April 2011 was 1.7%.

The data was reported Monday by the Bulgarian National Statistical Institute (NSI).

The annual average inflation, measured by CPI, in the last 12 months (May 2011 – April 2012) compared to the previous 12 months (May 2010 – April 2011) was 3.2%.

In April 2012, compared to the previous month, the prices of goods and services in the main consumer groups have been changed as follows: food and non-alcoholic beverages – a decrease of 0.1%; alcoholic beverages and tobacco – a decrease of 0.1%; clothing and footwear – an increase of 4.2%; housing (rentals, maintenance and repair), water, electricity, gas and other fuels – an increase of 0.8%; furnishings, household equipment and routine maintenance of the house – a decrease of 0.4%; health – an increase of 0.1%; transport – an increase of 0.9%; communications – the prices have remained at the level of the previous month; recreation and culture – a decrease of 1.6%; education – an increase of 0.1%; restaurants and hotels – a decrease of 0.2%; miscellaneous goods and service – an increase of 0.1%.

The harmonized index of consumer prices (HICP) in April 2012 compared to March 2012 was 100.2%, i.e. the monthly inflation was 0.2%. The inflation rate since the beginning of the year (April 2012 compared to December 2011) was 1.3% and the annual inflation in April 2012 compared to April 2011 was 2.0%.

The annual average inflation, measured by HICP, in the last 12 months (May 2011 – April 2012) compared to the previous 12 months (May 2010 – April 2011) was 2.6%.

In terms of HICP in April 2012 compared to the previous month the prices of goods and services in the main consumer groups have been changed as follows: food and non-alcoholic beverages – a decrease of 0.1%; alcoholic beverages and tobacco – a decrease of 0.2%; clothing and footwear – an increase of 3.6%; housing (rentals, maintenance and repair), water, electricity, gas and other fuels – an increase of 1.1%; furnishings, household equipment and routine maintenance of the house – an increase of 0.1%; health – an increase of 0.1%; transport – an increase of 0.9%; communications – a decrease of 0.1%; recreation and culture – a decrease of 1.1%; education – an increase of 0.2%; restaurants and hotels – a decrease of 0.9%; miscellaneous goods and service – the prices have remained at the level of the previous month.

The price index of a small basket (PISB) in April 2012 compared to March 2012 was 99.9% and the overall increase since the beginning of the year (April 2012 compared to December 2011) was 101.8%.

In April compared to the previous month the prices of goods and services in the small basket for the 20% households with the lowest income, have changed as follows: food products – a decrease of 0.2%; non-food products – a decrease of 0.3%; services – an increase of 0.6%.

The harmonized index of consumer prices (HICP) is the comparable measure ofinflation across EU Member states. It is one of the criterions of price stability and for readiness of Bulgaria to join the Euro Zone.

HICP, as well as CPI, measures the total relative price change of goods and services. Both indices are calculated using the same basket of goods and services, but differ with respect to the used weights. HICP is calculated through the use of weights, which reflect the individual and the collective consumption of all households (incl. institutional and foreign households) on the economic territory of the country. The main source of information for HICP weights is the national accounts data.

The price index of a small basket (PISB) is a measurement of the relativeaverage price changes of 100 socially useful and vital for the living goods and services. The weights of this index reflect he expenditures of the 20% lowest income households. The source of weights information is the Households Budget Survey in the country.

Bulgaria‘s growth continues to slow, mostly reflecting external headwinds, but there is room for optimism due to the expected euro area recovery in the second half of the year, IMF mission chief for Bulgaria has said.

“Real GDP growth is projected to reach 0.8% in 2012, which is lower than our previous forecast. Growth is expected to rise moderately to 1.5% in 2013, which shows we have taken into account the forecast for the euro area,” IMF mission headCatriona Purfield said in an interview for Capital daily after the end of the mission visit to Sofia.

The projected growth also reflects the expected euro area growth recovering in the second half of the year, which will allow exports to regain their position as the major driving force behind Bulgaria‘s economy, she pointed out.

Mrs Purfield singled out stronger EU funds absorption by Bulgaria and prudent policy as the key incentives for attracting more foreign direct investments and boosting growth.

Asked about the consistent rise in deposits in Bulgarian banks, Mrs Purfield said people are uncertain about their future, mostly because of external headwinds, and are seeking to safeguard their savings.

“The banking system remains well capitalized, liquid, profitable, and well supervised, which is why I think that it is doing very well amid the ongoing crisis,” she pointed out.

The IMF mission chief for Bulgaria stressed tapping international markets to secure funds to cover both future rollover needs and bolster the reserve would be a good option.

Mrs Purfield reiterated that at this juncture Bulgaria should increase the fiscal reserve, and to avoid steps that would reduce it.

“Strong fiscal buffers will ensure Bulgaria‘s resilience and safeguard this resilience going forward,” she said.

An International Monetary Fund (IMF) mission visited Sofia during May 2–9, 2012, to discuss economic developments and government policies with the Bulgarian authorities.

While the IMF projected gross domestic product growth of 0.8% in 2012 and 1.5% in 2013, the European Commission revised sharply downwards its forecast forBulgaria‘s economy, estimating it is to grow just 0.5% this year.

According to Brussels the European Union economy is in a “mild recession,” with a recovery “forecast to set in slowly from the second half of the year on”.

The European Union executive previously estimated that the economy of the Balkan country will grow 1.4% this year due to worsening growth prospects in key trading partners across Europe and stagnant domestic demand.

Last month Bulgarian analysts and institutions unanimously cut their growth forecast for 2012 to just below 1.5% instead of the previously forecast 2-3%, citing slumping exports and stagnant domestic demand.

The central bank BNB estimated Bulgaria‘s economic growth to slow-down to 0.7% in 2012, citing the sovereign-debt crisis in the euro area.

Bulgaria‘s economy expanded by 1.7% in 2011.

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Bulgaria should prudently increase the fiscal reserve and steer clear of reducing it,IMF mission has concluded at the end of its visit here.

“Fiscal buffers need to be raised to safeguard resilience. At this juncture, it would be prudent to increase the fiscal reserve, and to avoid steps that would reduce it,” IMFmission chief Catriona Purfield said in a statement.

The Bulgarian government wants to allow its Silver Fund, set up to anchor the public pension system, to also invest in bonds issued by national and local administrations. At the moment, only foreign securities with an adequate credit rating may be purchased.

Last month the European Central Bank strongly advised Bulgaria against investing the assets of the state fund for guaranteeing the stability of the state pension system in domestic assets.

According to the ECB, the fact that Bulgarian securities would not require a rating could place the Bulgarian government in “a privileged position compared to other issuers.”

Another concern is that provisions allowing the Silver Fund to channel up to 70% of its portfolio on Bulgarian bonds by 2016 could lead to skewed yields not driven purely by the markets.

Bulgaria‘s central bank BNB has also vehemently criticized the draft law, saying it puts at risk the already accumulated funds, as well as the country’s financial stability, but the finance minister has made it clear he will stick to his proposal.

The IMF meanwhile approved of the government’s plans to float a eurobond issue this year.

“Tapping international markets to secure funds to cover both future rollover needs and bolster the reserve would be a good option,” Purfield said Thursday.

Bulgaria plans to tap international markets at the end of May or in June to raise funds to repay about EUR 835 M (USD 1.07 B) in 11-year eurobonds maturing on January 15, 2013.

The bonds offered on international markets will be worth up to BGN 2 B.

According to unconfirmed information Finance Minister Simeon Djankov has decided to go for a five-year maturity partly because of the low indicative prices that the three financial institutions offered – less than a 4% yield – on bonds with that maturity.

The IMF also confirmed its spring World Economic Outlook, which reduced the 2012 economic growth projection for Bulgaria by almost half. The country’s gross domestic product growth is expected to reach 0.8% in 2012 and 1.5% in 2013.

The European Union‘s executive will suspend in the short term the excessivebudget deficit procedure against Bulgaria as the country has taken adequate steps to correct it, a deputy finance minister believes.

Bulgaria‘s budget deficit dipped below the European Union limit of 3% of gross domestic product last year because of the government’s prudent fiscal management, Deputy Finance Minister Boryana Pencheva told MPs from the European affairs parliamentary committee.

“Eurostat, the EU’s statistical agency, already confirmed that Bulgaria‘s budgetdeficit was a notch above 2% of GDP in 2011,” she added.

According to the deputy minister the European Commission usually suspends the proceedings for excessive budget deficit once the country meets the EU target and shows stable fiscal indices.

“The good news is that Bulgaria has one of the lowest budget deficit in EU and the second-lowest debt in the EU – at the end of 2011, the lowest ratios of government debt to GDP were recorded in Estonia 6.0% and Bulgaria 16.3%,” said Pencheva.

The European Commission launched in July 2010 an excessive budget deficitprocedure against Bulgaria and 24 other EU member-states to ensure that the countries reduce swiftly their state spending, and keep their budget deficit below 3% of the GDP.

The measure came shortly after Prime Minister Boyko Borisov and Finance Minister Simeon Djankov said the previous Socialist-led government had kept them in the dark over BGN 2.16 B contracts, which pushed the 2009 deficit up from a projected 1.9% to 3.7% of GDP

In the first of its twice-yearly reviews of government finances in the 27-member bloc, Eurostat said the Bulgarian government’s budget deficit was 3.9% of gross domestic product in 2010.

Prime Minister Boyko Borisov placed the blame squarely on the shoulders of the country’s former Socialist-led administration, saying the government has lied to the EU colleagues about the country’s readiness for the euro zone, being unaware of this trap.

The EU’s stability and growth pact requires governments to maintain public deficits below 3% of gross domestic product.

Bulgaria‘s government and the European Commission recently revised downwards their forecast for the economy of the Balkan country, estimating it is to grow 1.4% in 2012 due to worsening growth prospects in key trading partners across Europe and stagnant domestic demand.

Experts however have warned of looming recession. They have criticized the government for refusing to present updated forecasts for the economy’s growth this year and adapt the state budget to a more realistic scenario, not ruling out technical recession.

Bulgaria’s final foreign direct investment for 2011 will probably amount to EUR 1.6 B, according to Borislav Stefanov, head of the InvestBulgaria Agency.

“Foreign direct investment for 2011 has already surpassed EUR 1 B. I suppose that 2011 will be similar to 2010 in that regard, i.e. Bulgaria’s final FDI figure will be about EUR 1.6 B,” Stefanov told BNR.

The Director of the InvestBulgaria Agency explained that there is a discrepancy in the figures about Chinese investments in Bulgaria that are provided by the Bulgarian National Bank and the Chinese sources.

“According to the data of the InvestBulgaria Agency, the Chinese investments in Bulgaria are a little under EUR 60 M for the period between 1996 and 2011. According to Chinese data, this sum is over EUR 600 M. The discrepancy can be explained with the fact that BNB’s data is based on the transactions between Bulgarian firms with foreign shares and their parent companies,” he said.

Stefanov also commented on the upcoming visit of Qatar’s Prime Minister in Bulgaria, saying that Bulgaria has a number of projects for which it can seek Qatari investments.

Since the beginning of the year, no money has been transferred to Bulgaria‘s Silver Fund, set up to anchor the public pension system, shows its balance sheet, published online by the finance ministry.

Under local legislation the money in the Silver Fund comes from privatization deals, concessions, and budget surpluses (if any).

The money the Bulgarian state got from the sale of its dominant tobacco companyBulgartabac last year has also gone up in smoke, the check shows.

Bulgaria‘s sale body, the Privatization agency, told Dnevnik daily that the price of EUR 100.1 M has been paid by the buyer and transferred immediately to the account of the state budget in the central bank.

Under local legislation them money should next be transferred to the Silver fund, but this does not feature in its end of April report.

Finance Minister Simeon Djankov has explained that the transfer will be made by the end of May, admitting that by then the money can be invested or stacked up in a deposit account. The returns however will not be channeled into the Silver Fund, he pointed out.

The Silver Fund, a state retirement fund set up in 2008 in order to cover future pension system deficits caused by Bulgaria‘s aging population, is currently worth BGN 1.78 B.

The Bulgarian government wants to allow its Silver Fund to also invest in bonds issued by national and local administrations. At the moment, only foreign securities with an adequate credit rating may be purchased.

The proposal was criticized by the European Central Bank, which says the fact that Bulgarian securities would not require a rating could place the Bulgariangovernment in “a privileged position compared to other issuers.”

Such “indirect discrimination” could lead to “unjustified restrictions on the free movement of capital,” thus violating European Union rules.

Another concern is that provisions allowing the Silver Fund to channel up to 70 per cent of its portfolio on Bulgarian bonds by 2016 could lead to skewed yields not driven purely by the markets.

Finance Minister Simeon Djankov responded in a letter by stressing that any Bulgarian bond issues purchased by the fund would have interest rates based on market benchmarks.