Economy of Bulgaria

By | April 29, 2022

In the 1990s in the process of social transformation there was a deep economic recession. The reasons for this are related to the inherited energy and import-intensive production, the loss of traditional sales markets, the difficulties of reorienting foreign trade relations to Western markets, where Bulgarian goods were not competitive enough. According to cheeroutdoor, the limited domestic demand and increased competition for imported goods also had a negative impact on the capabilities of local producers. There were also miscalculations in managerial decisions that provide methods, rules and conditions for economic transformations. Despite the growth of the economy in 1998-2002, the volume of GDP remains below the pre-reform level. GDP in 2001 13.6 billion dollars, per capita – 1718 dollars.

In the 1990s the number of people employed in the economy decreased by almost 1/4. Economically active population in 2002 – 3248 thousand people. (48.4% of the total population over 15 years old), of which 2,704 thousand are employed, 544 thousand are unemployed. (16.8% of the workforce). Unemployment has become chronic. In 1991, “shock therapy” was carried out in Bulgaria, consumer prices increased 5.7 times. The second strong burst of inflation occurred during the crisis of the financial and banking system in con. 1996 – early. 1997. During 1996-2002, average annual consumer prices increased 39 times.

In the 1990s under the influence of demand in the domestic and foreign markets, as well as investment opportunities, there have been noticeable shifts in the sectoral structure of the economy. Employment in the service sector grew at the highest rate – 46.5% of the employed (2002). The industrial sector – 27.9%, agriculture – 25.6%. The main part of the employed (approx. 3/4) is concentrated in the private sector. In 2002, the service sector accounted for 52.7% of GDP, industry – 24.5%, agriculture – 11.0%.

Industry in Bulgaria in the 1990s experienced a deep structural crisis. In 2000-02 there were signs of growth. The volume of industrial production in 2002 increased by 0.6% (however, it was 20% lower than in 1995), incl. in extractive industries – by 24%, in manufacturing – by 23%. Capacity utilization – approximately 60% (late 2002).

80% of products are produced in the manufacturing industry, approx. 5% – in mining and 15% – in enterprises for the production and supply of electricity and heat, gas, water.

The largest share (ca. 18% in 2001) belongs to the production of food, beverages and tobacco products, which was traditionally developed in Bulgaria. An important place belongs to metallurgy and the production of metal products (more than 10% of gross output). Non-ferrous metallurgy, using local raw materials, is developing relatively successfully. Petroleum products, soda ash, mineral fertilizers are produced. The share of mechanical engineering is approx. ten%. In 2002, the production of radio-television equipment and means of communication, electronic computers and office equipment increased.

Bulgaria has favorable natural and climatic conditions for the development of agriculture. In the 1990s an agrarian reform was carried out, during which the land was returned to the former owners and their heirs, which led to the emergence of significant small and fragmented private ownership of land. This created serious problems for efficient land use and management. The deterioration of the material and technical security of agriculture, the reduction in investment, the loss of traditional foreign markets for agricultural products limited the realization of the potential of the industry. The dynamics of its production was unstable, and the volume in 2002 was 12% lower than in 1990. Almost all production is produced in the private sector. Crop and livestock production contribute almost equally to production (approximately 47% each), approx.

The development of agriculture is defined as one of the priority areas of the economy. The government intends to bring agricultural policy in line with the EU common agricultural policy, create conditions for the consolidation of plots and more efficient use of land, promote the development of the market and market infrastructure.

Bulgaria’s transport infrastructure is developing as an integral part of the pan-European transport network to become a transport bridge between Western and Central Europe and the countries of the Middle East, Western and Central Asia. The length of railway tracks is 6.4 thousand km, incl. 4.3 thousand km operated, of which 2/3 are electrified. The total length of the national road network is 37.3 thousand km. Maritime transport has 86 cargo ships, which serve the bulk of the foreign trade turnover. Seaports – Varna and Burgas. Bulgaria has four international airports. In 2002, 111.8 million tons of cargo were transported, incl. 16.5% by rail, 51.7% by road, 14% by sea and 16% by pipeline. In serving the population, a decisive role belongs to motor transport, which carries 2/3 of all passengers.

Favorable natural and climatic conditions create prerequisites for tourism, the development of which is recognized as one of the priorities. In 1999-2002 the number of foreign tourists visiting Bulgaria increased from 2.0 million to 2.99 million people. Tourist activity is carried out mainly by private business, which owns 96% of the property in this area. The largest number of tourists comes from Macedonia, Serbia and Montenegro, Greece, Great Britain and Germany. The introduction of a visa regime with Russia by Bulgaria (October 1, 2001) was accompanied by a decrease in the number of Russian tourists. In 2002 there were 24% less than in 2001.

The main directions of modern socio-economic policy are a focus on increasing the income of the population, reducing poverty and unemployment. The basis for this should be sustainable economic growth while strengthening macroeconomic stability. A course has been taken to accelerate structural reform, complete privatization and create a fully functioning competitive market economy.

In 2001-02, the macroeconomic situation in the country was relatively stable. GDP growth in 2001 – 4.1%, in 2002 – 4.8%. The inflation rate is 4.8 and 3.8%, respectively. The stabilization of the macroeconomics to a certain extent was facilitated by the mechanism of the currency board (in force since 1997), which is supposed to be maintained until joining the EU. A fixed exchange rate of the lev, pegged to the euro, has been established, the issue of central bank money is due to the increase in its foreign exchange reserves. Their size increased from 3.5 billion in 2000 to 3.58 billion in 2001 and 4.75 billion dollars in con. 2002. The functions of the central bank to refinance commercial banks were practically terminated; it can provide them with a loan only if the stability of the banking system is threatened. It does not have the authority to lend to the state, except for lending on SDRs. Most commercial banks have been privatized. As a rule, foreign investors became the owners of privatized banks. In 2002, there were signs of more active lending to the real sector of the economy. In connection with the conditions of the IMF and the desire to ensure EU norms, the focus on reducing the budget deficit became tougher, which in the 1990s. was chronic and covered mainly by external and internal borrowing. In 2001-02, the deficit of the consolidated state budget decreased (from 1.1% of GDP in 2000 to 0.9% in 2001 and 0.7% in 2002), and privatization revenues became the main source of its coverage. Changes in tax policy are aimed at strengthening the balance of the budget. Its concept is based on the need to evenly distribute the tax burden, stimulate business, reduce direct taxes and expand the tax base. Balancing current external payments and servicing the accumulated external debt remains an important problem. In con. 2002 external debt-gross amounted to 10.93 billion dollars (70.5% of GDP), incl. debt on long-term liabilities accounted for 85.7% of the debt, and on short-term liabilities – 14.3%; $1.29 billion, or 8.3% of GDP, was spent on servicing external debt.

In the course of reforming the economy, property was redistributed, real social transfers from the state were reduced, the previous model of stratification collapsed, a significant part of the population became impoverished, and property differentiation intensified. In 2000, real incomes per family member were 1/5 lower than in 1995. Real wages also remained lower than in 1995.

The development of foreign economic relations is one of the decisive factors in the dynamism of the Bulgarian economy. The volume of foreign trade turnover (2001) reaches 90% of GDP. Import provides approx. 2/3 internal power consumption.

In 2002, Bulgaria’s foreign trade turnover amounted to 13.38 billion dollars, incl. exports – 5.58 billion, and imports – 7.8 billion dollars. This year, exports for the first time exceeded the level of 1995. One of the most acute problems of the Bulgarian economy is a chronic deficit in foreign trade. Orientation to the West and the loss of the traditional market of the former USSR determined the geographical structure of foreign trade. The predominant part (65.6%) of its turnover in 2002 was in the OECD countries, incl. 52.6% – to the EU. They sold 72.6 and 55.8% of exports, respectively, and their share in imports was 60.6 and 50.3%. The Russian Federation accounted for only 1.6% of all Bulgarian exports and 14.7% of imports (supplying mainly energy resources).

Economy of Bulgaria