The number of companies that filed for bankruptcy in the first four months of the year has nearly doubled, with a similar trend recorded in the number of court rulings ordering audits to establish whether companies were insolvent, data from the Registry Agency showed.

A total of 118 firms filed for bankruptcy in January-April, up from 67 in the same period of 2008, while a further 123 audits were ordered by courts throughout the country – up from 72, Dnevnik daily reported on June 29.

The figures were only the first sign of the toll that the recession was taking on Bulgarian businesses, employer associations said, with worse yet to come.

Bozhidar Danev, chairperson of the Bulgarian Industrial Association, told news agency Focus that the number of bankrupt firms had reached 160 since the start of the year and there were no signs of improvement.

"In some sectors, like construction, as high as 20 per cent of companies could go bankrupt," he said. "The Cabinet’s measures to stimulate investment by small and medium-sized enterprises, allocating 500 million leva through the Bulgarian Development Bank, have yielded some results, but the utilisation has been slow because the environment is risky and companies are themselves wary of taking new loans, even if the interest is low."

"The Bulgarian economy will be affected the worst in January and February next year. That is when  company costs will go up and firms will have to use more drastic measures."

The construction, industrial and tourism sectors have borne the brunt of the downturn thus far and are expected to remain in the eye of the storm – the industry reeling from recession in key export markets, while construction and tourism feel the pressure from the burst property bubble.

"One of the reasons is that there are no specific measures to support the industry and ease access to bank financing," the chairperson of the Confederation of the Employers and Industrialists in Bulgaria (CEIBG) Ivo Prokopiev said, as quoted by Dnevnik.

Companies have managed to stay afloat by dipping into cash reserves accumulated during the boom years when the economy was growing at an average six per cent a year, but unless markets showed signs of picking up in the coming months, firms would struggle with limited access to funding, the daily quoted the chairperson of the Bulgarian Industrial Capital Association, Vassil Velev, as saying.

Unemployment
Official employment figures are yet to show a major impact from the recession. According to National Employment Agency data, there were 262 100 unemployed at the end of May, 7.1 per cent of the labour force.

Compared to May 2008, the number of unemployed went up by 33 000 people, but was still lower than in May 2007, when the economy was booming and the number of unemployed stood at 289 750. At the beginning of 2007, the figure was 358 000 people.

"The problems facing the labour market exist but, at least for the time being, are not as dramatic as they are presented sometimes," Petar Ganev from the Institute for Market Economics said in a research note. "Despite that, one should not overlook apparent problems and coming negative trends."

Unlike previous years, when unemployment would rise in winter and decline during other months, helped by seasonal jobs, this year there was no such downward swing, the data showed.

With the choice between fiscal and tax stimulus to boost employment, the Cabinet has focused mainly on the former – boosting its own spending to bring new jobs and maintain existing ones – but Ganev argued that it would have only a short-term effect of creating subsidised employment.

"The taxation stimulus, on the other hand, plays a more important role, since it was precisely the low direct taxation in recent years that led to reducing unemployment by more than 100 000 people," he said.