Author Archives: Marko Benda

IMF Report June 2014

IMF Concludes Staff Visit to Bulgaria
Press Release No. 14/278
June 12, 2014
An International Monetary Fund (IMF) mission visited Sofia during June 6–11, 2014, to discuss the economic outlook and government policies with the Bulgarian authorities. At the conclusion of this regular staff visit, Ms. Michele Shannon, IMF Mission Chief for Bulgaria, made the following statement:
We continue to project a modest pick-up in economic growth in 2014 from a subdued rate last year, driven by firming domestic demand and higher absorption of European Union (EU) funds. While unemployment is projected to remain high, employment has begun to rise. Consumer prices have been declining due to falling import prices, base effects from reductions in administered prices last year, and remaining slack in the economy. In the second part of the year, prices are expected to increase slightly as imported deflation wanes and growth rises.
The effects of domestic political uncertainty on reform momentum and investment, as well as lingering uncertainty in the outlook for key euro area trading partners, remain key risks to the outlook. Recent developments in Ukraine and Russia are projected to have modest growth effects through trade and investment channels, while dependence on Russian gas imports represents a potential risk. The timing of implementation of the South Stream gas pipeline project remains uncertain, and potential economic and employment effects are excluded from current projections. Low public sector debt and limited exposure to capital markets have continued to insulate Bulgaria from international market volatility.
Risks to budgeted government revenues this year remain significant, particularly in light of deflation. At the same time, expenditure pressures are strong. The 2014 deficit target has been appropriately maintained at 1.8 percent of GDP, which keeps the deficit within the legal limit and supports policy credibility. The government is implementing administrative measures to help meet this objective. Spending restraint will also be needed, including the use of spending buffers as planned by the government. At the same time, budgeted spending financed by EU funds should be fully implemented to allow for absorption of available funds within the required schedule, and work should continue with the European Commission to ensure EU funds that have been frozen are released in a timely manner. Likewise, timely passage of legislation to establish an independent fiscal council and an automatic correction mechanism for deviations from fiscal limits would further strengthen the fiscal rules framework.
The medium-term path of fiscal adjustment as described in the EU Convergence Program is appropriate. The aging population and continued emigration imply significant long-term public spending challenges. In this context, the financial effects on the pension system of the temporary freeze in the retirement age and the changed pension indexation rule last year will need to be addressed in a timely manner. Further improvements in the composition and quality of expenditure will be needed, including through increased efficiency in the health care sector. At the same time, strengthened efforts are needed to mitigate contingent liabilities and inefficiencies arising from state-owned enterprises. In this context, the financial situation in some parts of the energy sector, including the electricity sector, will need to be addressed. Details on such contingencies should be provided in a fiscal risk statement in the budget.
Regarding the financial sector, the implementation of the new EU regulatory regime is on track, including through the adoption of maximum capital conservation and systemic risk buffers applicable to all banks. In addition, the elimination of specific provisions resulted in a commensurate increase in regulatory capital. While credit growth remains low, the system is stable and liquid, with banks’ non-performing loans buffered by provisions and significant capital, as well as a positive net foreign asset position. Efforts by banks to address the stock of distressed assets and claim associated collateral should continue in order to lower asset price uncertainty and thereby support renewed investment.
Accelerated growth, job creation, and income convergence with EU partners will require more rapid progress in addressing critical institutional and broader structural rigidities. Key in this regard are efforts to strengthen human capital, address infrastructure gaps, increase the ease of doing business, and reduce corruption and cronyism, including through independent regulation and audit, as well as measures to reinforce the rule of law.

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Go Online and go Mobile! Your customers are already there..

Retail transformation…

There are various innovative technological breakthroughs in the 21 century that promote the growth of online retailing, and as such, define the future of the shopping center landscape. This section will highlight some of these innovative breakthroughs and continuities.

Mobile Point-of-Sale

To begin with, there are transformations in the way retails businesses run. Arguably, retail businesses are inclined towards providing more point-of-sale to customers through the provision of services that are convenient to customers. In this case, a customer does not need to go to a brick-and-mortar shop to make purchases. On the contrary, the online shopping through tablets, smartphones and PCs are becoming point-of-sales through which customers and retailers connect. With this in mind, customers can make their purchases from any place across the globe or from store itself. In other words, retailing is rapidly moving away from brick-and-mortar shops to online shopping via the internet.

New Retail Strategies

The floor-space has found totally new use in the retail sector. In this case, most retailers have in the recent past focused on setting up pop-up stores in factories, institutions of higher learning, beaches, trade fairs, or in factories, where they are open for a limited period of time such a day, a week, a month or a few months. Most of these retailers go to places where they believe there is a high demand for their products and services at a particular time, and in some cases, they create events that gives them the opportunity create their pop-up stores.


– The brick and mortar retail businesses are witnessing increase predatory competition with a decline in the floor-space yield.

– The Center Management continues to experience new challenges due to the decreasing foot traffic to different types of commercial real estate.

– The statistics point to the fact that the turnover of online shares is between approximately 4 per cent and 13 per cent, depending on the market or rather country in question. Therefore, it is necessary to examine how to make the 20 per cent of floor-space that is available productive.

– There are various reforms in the retail landscape due to the evolving consumer behavior – it is not the internet alone.

Shopping malls management needs to change

Intense predatory-like competition and crowding out currently define the retail sector in many European markets. In Western Europe, this competition is more pronounced as compared to Eastern Europe, which has also witnessed an increase in competition among key players in its retail markets. One of the factors that contribute to this increasing competition is the internationalization of the retail markets in the last two decades. For example the American Walmart had in the last ten year expanded their operations to more than 25 countries across the globe. A few years ago, retailers such as Hennes & Mauritz (H&M) had their presence in only ten countries. However, this retailer has since expanded its business operations to more than 80 countries across the globe. The same applies to The Body Shop, Marks & Spencer, Inditex Group, and Douglas among others. In this case, during the last few years, most retailers have become global players.

During this period of expansion and internalization, the global market places have witnessed increased construction activities that have resulted in emergence of numerous shopping centers in order to address the increased demand for retail space. Research points to the fact that these construction activities have led to the development of approximately 15,000 shopping malls and centers, retail parks and/or specialist malls, hypermarkets with retailers’ shopping galleries, and factory outlets across Europe. In most cases, these have comparable concepts and similar tenants.

What is it for customers?

Apart from increasing global retail competition, another factor that is making things difficult for shopping center is online retail boom and the changing behavior of retail consumers.

Evidence points to the fact that that there has been a considerable growth in B2C online retails activities in the USA, Europe and Asia. In this regard, online retail enjoys a sizeable market across the globe. For example, recent studies points to the fact that online retail activities will account for approximately 25 per cent of the total retail sales by 2020 in EU.

Business scholars, researchers, and analysts argue that the growth of online retail will only stagnate once its market share reaches 70 per cent. This implies that the mortar and brick retail business will become irrelevant in future.

But we still have time, right? I dont think so.