Bulgaria: Economic and Political Overview
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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 4.2% in 2021 and 3.9% in 2022, supported by robust growth in exports and by wage and social transfer increases partly compensated for increasing consumer prices. Increased EU funds absorption, notably of the Recovery and Resilience Facility, should support aggregate investment in both 2023 and 2024 when the economy is forecast to grow by 3% and 4.1%, respectively (IMF).
The country's public finances are relatively strong, with a low debt-to-GDP ratio, estimated at 22.8% in 2022. Nevertheless, the IMF expects the ratio to grow over the forecast horizon, to 25.2% this year and 26.9% in 2024. The government budget recorded a deficit of BGN 1.5 billion, around 1% of GDP in 2022 as per the latest government figures, with a forecast of 1.9% and 1.4% this year and the next respectively, according to the IMF. Energy and food prices fuelled inflation, which reached 13% in 2022 (EU Commission). Overall, HICP inflation is set to decline to 5.2% in 2023 on account of lower energy prices, before decelerating further the following year (2.2% - IMF).
The unemployment rate was estimated at 5.1% in 2022 when wage and social transfer increases compensated for rising consumer prices. In 2023, wages are expected to continue to grow firmly and underpin household consumption, while the unemployment rate is forecasted to decrease to 4.7%. Bulgaria is classified as an upper-middle income country, with a GDP per capita (PPP) estimated at USD 29,178 in 2022 by the IMF, compared to an EU average of USD 53,960. Nevertheless, income inequality in Bulgaria is among the highest in the EU, and almost 31.7% of the population is at risk of poverty (the second-highest rate in the EU after Romania).
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 70.35 | 84.12 | 89.12 | 100.64 | 105.92 |
| GDP (Constant Prices, Annual % Change) | -4.0 | 7.6 | 3.4 | 1.4 | 3.5 |
| GDP per Capita (USD) | 10,171 | 12,300 | 13,109 | 14,893 | 15,770 |
| General Government Balance (in % of GDP) | -2.3 | -3.7 | -1.2 | -3.2 | -3.1 |
| General Government Gross Debt (in % of GDP) | 23.2 | 22.8 | 21.8 | 21.1 | 22.9 |
| Inflation Rate (%) | 1.2 | 2.8 | 13.0 | 7.5 | 2.2 |
| Unemployment Rate (% of the Labour Force) | 5.2 | 5.3 | 4.3 | 4.6 | 4.4 |
| Current Account (billions USD) | 0.03 | -1.56 | -0.61 | -0.49 | -1.07 |
| Current Account (in % of GDP) | 0.0 | -1.9 | -0.7 | -0.5 | -1.0 |
Source: IMF – World Economic Outlook Database, October 2021
Traditionally an agricultural country, Bulgaria is now considerably industrialised. In fact, the agricultural sector only accounts for 4.4% of GDP and employs 7% of the workforce (World Bank, latest data available). The main crops are sunflower, tobacco and wheat. Around 46.5% of the country’s territory is considered agricultural land. The total number of agricultural holdings is 132,742, while the total number of registered farmers in 2021 was 76,372 (EU Commission, latest data available). According to preliminary NSI data, the total output of the agricultural industry at basic prices in 2022 stood at BGN 12,903.2 million, which was 19.7% higher than in the previous year. The increase was due to the rise in prices by 29.7%, while volumes decreased by 8.7%.
The industry represents 20.8% 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 62.3% of the GDP and employing around 63% of the workforce. Tourism is one of the fastest-growing sectors: it was estimated to contribute 3.1% of GDP before the pandemic. The sector showed signs of recovery in 2022 when Bulgaria welcomed 11 million tourists, 27% more than the previous year. According to the latest figures from the European Banking Federation, 25 banks are currently operating in Bulgaria, seven of which are foreign bank branches. The top five banks hold approximately 66.9% of all assets.
| 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) | 4.4 | 20.8 | 62.3 |
| Value Added (Annual % Change) | 28.8 | 1.7 | 9.9 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: September 2023
