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Bulgaria Defence and Security Report Q4 2010
Market |
Defence |
Report Type |
Market Research |
Country |
Bulgaria |
Published |
19 August 2010 |
Number of Pages |
63 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
- |
Bulgarias potential role in hosting part of the US-proposed missile defence shield in Europe, coupled with the governments commitment to the EU-led Nabucco pipeline, will keep relations with Moscow tense. While the administrations tougher stance towards Russia may boost the popularity of Prime Minister Boyko Borissov and his GERB party, there is a risk of a significant deterioration in diplomatic and trade relations.
On the domestic front, indications that EU aid payments to Bulgaria may once again be suspended have cast a shadow on the new governments progress on eradicating corruption. While we view positively the governments tough stance on graft, we still caution that real reform will be challenging, with efforts so far focused on prosecuting previous government members rather than working to disincentivise the practice. In the meantime, popular support for the Prime Minister — and the government — and relations with the EU will likely deteriorate should tangible results not prove forthcoming.
As one of the last economies in emerging Europe to enter recession, Bulgaria will also be one of the last to exit the downturn, with a further year of negative growth on the way in 2010. Even though we expect a return to positive growth in 2011, we nonetheless stress that private sector deleveraging, limited scope for fiscal expansion and weaker external demand will prevent economic growth returning to the 6% range seen at the peak of the previous cycle.
A key question amidst this mixed economic outlook is whether the current level of military expenditure can be maintained. A great deal of uncertainty surrounds Bulgarias defence industry, with prospects varying greatly from one company to another. Future government spending is likely to focus on advanced technology offerings so as to modernise materiel. In this context Bulgarian companies, focused largely on low-tech products such as small arms, will not experience significant increases in demand. NATOcompatible companies such as Arcus and Arsenal can reasonably hope to win contracts supplying the Bulgarian army with small arms. In addition, membership of NATO and the EU are pushing the military increasingly towards professionalisation.
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