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Expected Recovery of the Construction Sector

The construction sector is perhaps not one of the most lucrative sectors. Despite that construction of every type of property, whether residential, commercial or industrial is a very fascinating investment proposition in Bulgaria since construction and land costs are fairly low, while the demand for modern and high quality real estate in expanding. Also, there has been a significant improvement in lending of loans to both businesses and households for the purchase of real estate in Bulgaria by the Bulgarian and foreign banks.

Bulgaria, in the recent years has experienced a boom in the industrial and commercial construction sector. The growth in the commercial sector can be attributed to rapid growth in Business in Bulgaria and establishment of operationsby foreign companies in Bulgaria. And since Bulgaria has joined the European Union, projects in the industrial construction sector are now eligible for EU financing which marks the boom in the industrial construction sector. The construction industry in 2015 was characterized by favorable dynamics and a change in the growing negative trend established over the years.Statistical data for some indicators bear a positive sign and indicate the expected pace of recovery and rebuilding growth of the construction sector.

The shrinkage of the Bulgarian construction industry occurred because many projects nationwide were frozen. Projects from real estate to office space, logistical centers, warehouses, and others, were either postponed or scrapped altogether. Infrastructure projects, which were prioritized during the global crisis, although helpful, could not offset the industry’s stagnation and compression. This decline can also be attributed to the country’s high unemployment rate, economic slowdown, a large budget deficit, weak business confidence and consumer demand, and the Eurozone’s depressed economic environment.

Composition of the Construction Output
There has been a massive increase in the civil engineering sector while the residential construction sector has experienced a significant decline.

Unemployment Rate decreased to 9.88 percent in March from 10.19%. Unemployment Rate averaged 12.04% from 1991 until 2019, reaching an all-time high of 19.27% in February of 2001 and a record low of 4.68% in April of 1991.

According to the National Statistical Institute, Bulgaria registered real GDP growth of 0.7% in the third quarter of 2013. Bulgarian real GDP is expected to report a growth rate in the range of 0.4-0.7% which is mainly due to low private consumption and high unemployment in the economy. Bulgaria’s GDP growth is predicted to improve to an annual 3.0% over 2016-2019 supported by gradual improvement in domestic demand and an anticipated recovery in the Eurozone that will boost Bulgaria’s exports. According to the Bulgarian National Statistical Institute (NSI), the number of new start up buildings was 2,935 in the third quarter of 2012 while in the third quarter of 2013 was 3,156 which represents the increase of 7.5%.

Infrastructure construction was the largest market in the Bulgarian construction industry during the review period, accounting for 47.1% of its total value in 2017. The market is expected to increase in importance over the forecast period, to account for 48.7% of the industry’s total value in 2023. The market will be supported by the government’s plans to improve the country’s transport infrastructure, such as the Transport and Transport Infrastructure 2017-2023 program. Various road infrastructure projects are expected to be completed over the forecast period.

Key Trends Expected to Drive Growth of Construction Sector
There are various macroeconomic factors that can be associated with the growth of the Construction sector in Bulgaria. The government of Bulgaria has taken a lot of measures to improve the economy’s construction sector. The government passed 3,817 permits for new residential buildings construction and 56 permits for new administrative buildings in the third quarter of 2013 which will support demand in the construction industry over the forecast period. In addition to this, to revive the housing market, the government has cut interest rates on mortgage loans as low interest rates are expected to support growth in residential property demand in Bulgaria. Due to urbanization and an improving economy, demand for residential construction will support the market.

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