Page 14 - bne IntelliNews monthly magazine September 2024

14 I Companies & Markets bne September 2024
The rapid growth of SMEs, driven by import substitution and a service sector boom in 2022-2023, is slowing, as evidence by the latest services PMI, which is hovering around the no-change mark.
Price increases for services, particularly in the hotel sector, have outpaced official inflation rates, and this trend may not continue. Slowing wage growth and tighter credit conditions will likely reduce demand for services and related products, affecting the hiring of seasonal workers and production efficiency improvements.
These developments create a sense of uncertainty about the future course of the Russian economy.
"All resources in Russian economy are exhausted. Inflation
is rising, Extreme lack of the workforce. Adding money
from reserves to market will just increase inflation without bringing new growth. Russia is likely facing stagnation or deep recession", said Nabiullina said on July 29.
Nabiullina is now trying to engineer a soft landing. In one scenario, as predicted by the Central Bank, involves a collapse of imports, a sharp economic slowdown, and stagnation
of real wages and investment activity. This would require maintaining tight credit policies and additional measures to reduce public demand, such as demobilisation or reduced state defence orders.
Another scenario suggests a moderate slowdown, with GDP growth reducing from 4.1-4.3% in 2024 to 2.2-2.3% in 2025, and a gradual reduction in real wage growth to 3-3.5% and real income growth to 2%.
Either scenario would allow the Central Bank to consider lowering interest rates by spring 2025, possibly after another rate hike this year. The currency market is expected to adapt to the new exchange rate formation mechanism, with foreign trade settlements gradually stabilising through cryptocurrencies which are being developed now and direct settlements.
Bulgaria temporarily freezes Chiren gas storage expansion amid EPPO investigation
Denitsa Koseva in Sofia
Bulgaria is freezing the project to expand the Chiren underground gas storage facility until the European Public Prosecutor’s Office (EPPO) completes an investigation it has launched into the implementation of the project, caretaker Energy Minister Vladimir Malinov said at a press conference on August 14.
A day earlier, EPPO started raids of offices of Bulgaria’s state- owned gas transmission operator Bulgartransgaz in an investigation related to the expansion of the Chiren gas storage.
Apart from Bulgartransgaz, EPPO is probing three more compa- nies located in various cities in Bulgaria over alleged fraud related to the Chiren expansion project that is funded by the EU.
Malinov said that the project will be halted until the EPPO completes its investigation, but also noted that the diversification of gas supplies is impossible without the completion of that project and of the LNG terminal in Alexandroupolis. He also said that no construction works have been carried out on Chiren’s expansion so far.
"I hope that the inspection of the European Prosecutor's Office at Bulgartransgaz EAD on the project for the expansion of
the underground gas storage in Chiren will be completed as soon as possible, so that we do not allow the project, which is
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key to diversification and energy security in the region, to be delayed,” Malinov told journalists.
"The diversification of gas supplies without the realisation
of the project for a liquefied natural gas terminal in Alexandroupolis and without the expansion of the gas storage in Chiren is impossible,” he added.
The EPPO was contacted by the Bulgarian Energy and Mining Forum (BEMF) in February. The organisation claims that Bulgartransgaz changed subcontractors after receiving an EU grant of €78mn for the implementation of the project. At the time, Malinov was heading the company.
The BEMF said that the replacement of subcontractors violated the contract and could compromise the implementation of the project as the participants in the project’s implementation have no experience in oil and gas drilling.
The EU granted €78mn to Bulgaria for the Chiren storage’s capacity expansion, as the project was seen as important for the country’s faster transition from coal to green energy.
The project envisages the doubling of Chiren’s storage capacity, from 550mn to 1bn cubic metres (bcm), enhancing gas withdrawal and injection capabilities.