Bulgaria flag Bulgaria: Economic and Political Overview

The economic context of Bulgaria

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Covid-19 pandemic hit Bulgaria at a time when its economy was performing well. Before the sanitary crisis, a series of structural reforms, the highly successful integration of Bulgarian manufacturing firms into world production chains, and sound macroeconomic management had led to five years of growth rates above 3%, rapidly rising real wages and historically low unemployment. After falling into recession in 2020, the economy rebounded and grew an estimated 4.5% in 2021 (IMF), underpinned by robust private consumption and the recovery of goods exports. According to IMF's forecasts, growth is expected to reach 4.4% in 2022 before marginally slowing to 4% in 2023, also thanks to the EU Recovery and Resilience Facility grants (which should cumulate about 4.3% of 2019 GDP over the forecast horizon).

The country's public finances are relatively strong, with a low debt-to-GDP ratio. However, the effects of the Covid-19 crisis are clearly visible: the debt increased from a pre-pandemic level of 18.4% to 25% in 2021, and the government budget was negative by 2.3% of GDP in the same year, as the government extended the emergency support to households, businesses and the health sector. The deficit is forecast to remain stable in 2022 and decrease to 1.3% the following year as most measures are phased-out and revenues recover. On the other hand, the debt-to-GDP should rise further (to 26.1% and 26.7% this year and the next). Headline inflation reached 2.1% in 2021 on the back of high energy prices. The IMF expects the rate to float around 1.9% over the forecast horizon.

The unemployment rate was estimated at 5.2% in 2021, strongly influenced by the negative economic impact of the COVID-19 pandemic despite the job-retention schemes put in place by the government. The favourable economic outlook is set to tighten the labour market over the forecast horizon, hence unemployment should follow a downward trend (4.7% this year and 4.4% in 2023 – IMF). Overall, income inequality in Bulgaria is among the highest in the EU, and almost 35% of the population is at risk of poverty (the second-highest rate in the EU after Romania).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 68.5669.21e77.9184.3191.12
GDP (Constant Prices, Annual % Change) 3.7e-4.24.54.44.0
GDP per Capita (USD) 9,863e10,00611,33212,33713,414
General Government Balance (in % of GDP) 0.8-1.8e-2.3-2.3-1.3
General Government Gross Debt (in % of GDP) 18.423.6e25.026.126.7
Inflation Rate (%) 2.51.2e2.811.03.3
Unemployment Rate (% of the Labour Force) 4.35.2e5.24.74.4
Current Account (billions USD) 1.26-0.460.400.29-0.21
Current Account (in % of GDP) 1.8-0.70.50.3-0.2

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Traditionally an agricultural country, Bulgaria is now considerably industrialised. In fact, the agricultural sector only accounts for 3.4% of GDP and employs 6.6% of the workforce (World Bank, latest data available). The main crops are sunflower, tobacco and wheat. Around 46% of the country’s territory is considered agricultural land. According to preliminary NSI data, in 2021 the gross output of the agricultural sector stood at BGN 10.2 billion, with cereals and oilseeds having a share of about 60% (+61% and +54% year-on-year, respectively).

The industry represents 23% of the GDP, and 30% of the workforce is employed in the sector. It continues to rely heavily on the manufacturing sub-sectors (metallurgical, chemical, machine-building), which are estimated to contribute to 14% of GDP (World Bank). However, the most dynamic sectors are textile, pharmaceutical products, cosmetic products, mobile communication and the software industry. Bulgaria's main mineral resources include bauxite, copper, lead, zinc, coal, lignite (brown coal) and iron ore.

The tertiary sector has more than doubled its contribution to the country’s economy since the end of the communist system, accounting for 60.2% of the GDP and employing 63.4% of the workforce. Tourism is one of the fastest-growing sectors (contributing 3.1% of GDP before the pandemic). According to the latest figures from the European Banking Federation, there are 24 banks operating in Bulgaria, six of which are foreign bank branches. The top five banks held approximately 66.6% of all assets; with domestic banks holding a market share of 22.4% against 71.5% of EU subsidiaries.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 6.6 30.0 63.4
Value Added (in % of GDP) 3.4 23.0 60.2
Value Added (Annual % Change) -5.3 -4.6 -4.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
70,4/100
World Rank:
35
Regional Rank:
20

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.49/10
World Rank:
45/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Economy
Ministry of Finance
Statistical Office
National Statistical Institute
Central Bank
Bulgarian National Bank
Stock Exchange
Bulgarian Stock Exchange
Economic Portals
Bulgaria business portal
 

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Latest Update: July 2022

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