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Sales and growth in industry for 2004 and prospects for 2005.
submited on 01.03.2005 in category Privatisation | Macroeconomic developments
submited on 01.03.2005 in category Privatisation | Macroeconomic developments
The previous year of 2004 was by all means favorable to the Bulgarian industry. A series of factors had a beneficial impact, including: 1. A global rise in investment demand. 2. Expanding access to capital. 3. A growing domestic demand.
We expect that short-term and one-time favorable factors that fostered the growth in industry in 2004 to come to an end. In these changes that we foresee in 2005 are:
1. The already started tightening of monetary policy in the US which will affect not only interest rates on international financial markets, but also the expansion in the real sector that was temporarily supported by the “cheap credit” policy. This will lead to a contraction of investment demand and consequent drop in prices of metals and other raw materials.
2. The probable high level of crude oil prices will also have a negative impact on industrial activity.
3. The introduction of credit restrictions for Bulgarian commercial banks will cool down the expansion of consumer credit, which will lead to a stabilization of domestic demand.
4. Bulgarian industry will suffer a severe competitive pressure with the opening of EU markets for Chinese textile products.
5. In the short-term the anticipated fast growth in wages will put pressure on the labor costs in industry.
Sales dynamics
In 2004 industrial sales grew by more than 27%. The biggest segment – the manufacturing sector – increased sales by 30%. The overall expansion includes almost all sub-sectors. Only three sub-sectors report a drop in sales for 2004. In 18 out of 24 subsectors the growth rate is double-digit (higher than 10%). If we have to identify leaders, they would include those benefiting from the global expansion of investment demand (and mostly – metallurgy) and from the growth in new construction domestically. At the same time, energy efficiency is improving – sales of energy grow by only 1.8%.
Several big manufacturing sub-sectors are not within the group of ‘growth leaders’, but they have significant impact both due to their size and number of employees. Garments’ industry is slightly slowing down its growth to 12.4%. At the same time, food industry grows by 15.4%, mainly due to export expansion and the overall integration of the sector in international production chains. Wood industry grew by 30% driven mainly by timber exports to neighboring countries and expanding furniture sector.
Labor costs and employment in industry
Wages overall, and by industrial sectors grew steadily throughout 2004. For the industry as a whole the growth rate was 5.5% while in manufacturing (with about 580,000 employees) wages grew by 6.6%. During the year labor costs grew at the same rate as the gross value added which proves that the possibility of growth based on labor cost savings is exhausted. A pressure on the labor costs was created by a number of government-financed employment programs which reduced the supply of labor mostly in the low productivity segment of the labor force and in seasonal employment.
We expect that short-term and one-time favorable factors that fostered the growth in industry in 2004 to come to an end. In these changes that we foresee in 2005 are:
1. The already started tightening of monetary policy in the US which will affect not only interest rates on international financial markets, but also the expansion in the real sector that was temporarily supported by the “cheap credit” policy. This will lead to a contraction of investment demand and consequent drop in prices of metals and other raw materials.
2. The probable high level of crude oil prices will also have a negative impact on industrial activity.
3. The introduction of credit restrictions for Bulgarian commercial banks will cool down the expansion of consumer credit, which will lead to a stabilization of domestic demand.
4. Bulgarian industry will suffer a severe competitive pressure with the opening of EU markets for Chinese textile products.
5. In the short-term the anticipated fast growth in wages will put pressure on the labor costs in industry.
Sales dynamics
In 2004 industrial sales grew by more than 27%. The biggest segment – the manufacturing sector – increased sales by 30%. The overall expansion includes almost all sub-sectors. Only three sub-sectors report a drop in sales for 2004. In 18 out of 24 subsectors the growth rate is double-digit (higher than 10%). If we have to identify leaders, they would include those benefiting from the global expansion of investment demand (and mostly – metallurgy) and from the growth in new construction domestically. At the same time, energy efficiency is improving – sales of energy grow by only 1.8%.
Several big manufacturing sub-sectors are not within the group of ‘growth leaders’, but they have significant impact both due to their size and number of employees. Garments’ industry is slightly slowing down its growth to 12.4%. At the same time, food industry grows by 15.4%, mainly due to export expansion and the overall integration of the sector in international production chains. Wood industry grew by 30% driven mainly by timber exports to neighboring countries and expanding furniture sector.
Labor costs and employment in industry
Wages overall, and by industrial sectors grew steadily throughout 2004. For the industry as a whole the growth rate was 5.5% while in manufacturing (with about 580,000 employees) wages grew by 6.6%. During the year labor costs grew at the same rate as the gross value added which proves that the possibility of growth based on labor cost savings is exhausted. A pressure on the labor costs was created by a number of government-financed employment programs which reduced the supply of labor mostly in the low productivity segment of the labor force and in seasonal employment.
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