Company Trend Analysis - Inefficient Enforcement Will Limit Insurance Policy Effect - JAN 2018
BMI View: Bulgaria's new policy for its mandatory vehicle insurance will have a limited negative impact on passenger vehicle sales as its traffic law enforcement remains inefficient and its robust consumer spending growth coupled with favourable economic indicators will keep the passenger vehicle market buoy ant over our 2018-2021 forecast period.
On January 1 2018, Bulgaria will introduce its new Policy on Mandatory Vehicle Insurance that will penalise bad drivers by increasing their insurance costs. The new policy dictates that drivers that have not committed any traffic violations in the last few years will receive a 50% discount on the price of their mandatory insurance and that drivers who have committed a traffic violation will pay up to 180% more on their mandatory insurance. This will place increased strain on consumers' ability to afford new vehicles over our 2018-2021 forecast period.
We have therefore slightly revised down our growth outlook for Bulgaria's passenger vehicle segment for 2018 from our previous forecast of 7.7% to 7.2% and we forecast passenger vehicle growth to continue at an annual average rate of 6.8% over our 2018-2021 forecast period. We do not believe that a greater revision will be required due to our Country Risk team's robust outlook for Bulgaria's consumer market and its inefficient traffic law enforcement. In 2008 (the last year data was published), Bulgaria issued 20 speeding fines per 1,000 of its population whereas the EU's average for the same period was 84 fines issued for every 1,000 of its population. This highlights the structural inefficiencies within Bulgaria's law enforcement. Furthermore, Bulgaria's public services rank particularly poorly for corruption at 75th out of 176 countries covered by the Corruption Perceptions Index (CPI) in 2016, which measures the extent to which corruption is believed to exist in a particular country.
|Consumer Spending To Keep Sales Growth Strong|
|Bulgaria - Passenger Vehicle Sales & Private Final Consumption|
|f = BMI forecast. Source: National sources, BMI|