Bulgaria - Economy

Economy

Bulgaria has an industrialised market economy in the upper middle income range, where the private sector accounts for more than 80 per cent of GDP. From a largely agricultural country with a predominantly rural population in 1948, by the 1980s Bulgaria had transformed into an industrial economy with scientific and technological research as its top priorities in terms of budget expenditures. The loss of COMECON markets in 1990 and the subsequent "shock therapy" of the planned system caused a sharp drop in industrial and agricultural production, ultimately followed by an economic collapse in 1997. After 2000, Bulgaria experienced rapid economic growth, even though its income level remained one of the lowest within the EU with a gross average monthly wage of 768 leva (393 euro) in September 2012. Wages, however, account for only half of the total household income. Bulgarian PPS GDP per capita stood at 45 per cent of the EU average in 2011 according to Eurostat data, while the cost of living was 51 per cent of the average. The currency is the lev, which is pegged to the euro at a rate of 1.95583 levа for one euro. Bulgaria is not part of the eurozone and the financial crisis has pushed the accession date beyond 2015 according to some economic analysts.

Unemployment rate stood at 12.4 per cent in September 2012 and GDP growth contracted from 6.2 (2008) to −5.5 per cent (2009) amid the late-2000s financial crisis. The crisis had a negative impact mostly on industry, causing a 10 per cent decline in the national industrial production index, a 31 per cent drop in mining, and a 60 per cent drop in "ferrous and metal production". Positive growth was restored in 2010, reaching 0.2 per cent. However, by the end of 2011, investments were diminishing and consumption was dropping steadily due to rising unemployment. In 2010, intercompany debt exceeded 51 billion euro, and about 60% of all Bulgarian companies were indebted, excluding subcontractors, suppliers and producers. It is, along with very low wages, a significant obstacle to sustained economic growth. Despite positive fiscal policies and a flexible labour market, IMF and EU-encouraged austerity measures during the crisis have resulted in "catastrophic" social consequences according to the International Trade Union Confederation.

Corruption remains a serious problem. Bulgaria ranks 86th in the Corruption Perceptions Index and its results are gradually worsening. Economic activities are eased by the lowest personal and corporate income tax rates in the European Union, and the second-lowest public debt of all member states at 16.3 per cent of GDP in 2011. In 2011, GDP (PPP) was estimated at $101 billion, with a per capita value of $13,789. Sofia and the surrounding Yugozapaden planning area are the most developed region of the country with a per capita PPS GDP of $24,647 in 2009. The service sector accounts for 64.6 per cent of GDP, followed by industry with 30.1 per cent and agriculture with 5.3 per cent. The labour force is about 2.5 million people. Bulgaria is a net receiver of funds from the EU. The absolute amount of received funds was 589 million euro in 2009.

Local iron, copper, coal and lead deposits are vital for the domestic manufacturing sector. Major industries include extraction of metals and minerals, production of chemicals, machinery and vehicle components, petroleum refinement and steel. The mining sector and its related industries employ a total of 120,000 people and generate about five per cent of the country's GDP. The country is Europe's fourth-largest gold producer and sixth-largest coal producer. Almost all top export items of Bulgaria are industrial commodities such as oil products ($2.24 billion), copper products ($1.59 billion), medicaments ($493 million) and military equipment ($358 million).

In contrast with the industrial sector, agriculture has declined for the past decade. Production in 2008 amounted to only 66 per cent of that between 1999 and 2001, while cereal and vegetable yields dropped by nearly 40 per cent after 1990. Bulgaria, however, remains a net agricultural and food exporter, and two-thirds of its exports are to OECD countries. The country is the largest global producer of perfumery essential oils such as lavender and rose oil. A five-year modernisation and development programme was launched by the government in 2007, aimed at strengthening the agricultural sector with a total investment of 3.2 billion euro.

In recent years Bulgaria has emerged as an attractive tourist destination with some of Europe's least expensive resorts and the last remaining beaches outside the reach of the tourist industry. Lonely Planet ranked Bulgaria among its top 10 travel destinations for 2011. More than 40 per cent of its 9,000,000 annual visitors were Greeks, Romanians and Germans. Main destinations include the capital Sofia, the medieval capital Veliko Tarnovo, coastal resorts Golden Sands and Sunny Beach and winter resorts Bansko, Pamporovo and Borovets.