The results of the European elections in Bulgaria foretell unstable majority after the Parliamentary Vote
The results of the European Elections 2009 held on 7th June showed that the parties in the governing coalition still hold majority of the votes, although not enough to form a stable government coalition after the upcoming general elections in July. CEDB (Citizens for European Development of Bulgaria) won 627,693 votes - 24.48%. BSP (Bulgarian Socialist Party) won 476,618 or 18.59%. MRF (Movement for Rights and Freedoms) – 364,254 votes and 14.21%. ATTACK party -- 307,985 votes and 12.01%. NMSS (National Movement for Surge and Stability) – 205,145 votes around 8.00% and the Blue Coalition (UDF-DSB) – 204,784 or 7.99%. Two new parties gathered sufficient result to overcome the parliamentary threshold of 4%: LEADER with 146,984 votes and 5.73% and Law, Order, Justice with 120,280 and 4.69%. There is less than one month to the general elections, so it is safe to assume that this result will be repeated.
Analysis and forecast (↑ increasing risk)
There is no possible stable majority with only three parties ever since CEDB severely confronted BSP and MRF, and thus ruled out the possibility of a coalitional government between the three political forces with largest electorates. As a result, three scenarios are plausible at present:
- CEDB apologizes and enters tripartite coalition with BSP and MRF. This scenario is not very likely, since it would destroy the public image of CEDB and its leadership. However, this option would be good for PM Sergey Stanishev (BSP) as it would allow him to accumulate even more power in his own party, being the first democratically elected PM for second term. It would be a bad option for MRF, since the party would be constantly threatened to be substituted in the coalition by other parties and the leader Ahmed Dogan would probably boycott this scenario.
- The second option is even more improbable. If the general elections showed 2. better results for BSP, MRF and NMSS might stay in power in the same format. This option would be again opposed by Dogan since the economic crisis would force the next government to adopt unpopular policies.
- The third scenario is a multiparty centrist-right government that would be 3. anonymously supported by MRF and BSP. The program cabinet would have to “lead Bulgaria out of the crisis” and would suffer all negative results of the implementation of unpopular policies. Then MRF and BSP, with the help of NMSS and LEADER, would be able to regain power. This scenario would be the best for BSP and MRF in the long term, though it would lead to political instability, corruption scandals and the loss of face of the right-wing parties and leaders for years to come. What is worse, the traditional right parties have been out of power for 8 years now and would certainly accept this option, even if it is a short term one.
Bulgaria’s FDI falls to EUR 667 million for Q1 2009
The first quarterly statistics from the Bulgarian National Bank show that the decline in foreign direct investment for Bulgaria has been close to 50% YoY. The steepest fall is observed in what was prior to 2009 the leading recipient of FDI – the real estate operations sector. There the decline is almost 80%. Financial intermediary, the second largest recipient of FDI experiences a more moderate decline of 12%. The construction sector is one of the few that records growth. Direct investment from abroad has increased from EUR 102 million in Q1 2008 to EUR 125 million in Q1 2009.
Analysis and forecast (↑ increasing risk)
Additional statistics, such as 13% decline in new dwellings YoY for Q1 2009, suggest that the market is already sensitive to the contraction in demand in the real estate sectors and foreign investors, as well as local realtors will experience a period of diminished activity and low profits. This trend will be influencing Bulgaria’s FDI statistics throughout 2009. The country is yet to devise opportunities for redirecting FDI away from real estate and into other sectors. Q2 FDI statistics will likely reflect a decline in manufacturing as well. For the first quarter such decline was not observed due to low comparative base from the beginning of 2008.
The most disturbing trend stemming out of the decline in FDI is that the trade account deficit will to a lesser degree be covered by foreign currency entering the country through FDI. This opens up the potentiality for Balance of Payments deficit, which to this point in 2009 has been avoided due to slow down in consumption of foreign goods.
Source: Bulgarian National Bank