Economical overview
BULGARIA is the poorest EU member countries
in terms of gross domestic product (GDP) per capita. It
was formerly a prominent agricultural country but
underwent rapid industrialization during the communist
era, when agriculture was also collectivized. Today, the
service sector is predominantly dominated by tourism and
foreign trade.
The informal sector of the economy is estimated to be
around one third of GDP. The proportion of the labor
force in the "gray" or "black" sector is believed to be
even higher. This means that many work without
employment contracts and security, at the same time as
the state loses tax revenue.
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The economy during the communist era was marked by
heavy industry linked to trade with the Soviet Union.
The transition to market economy during the 1990s was
initially slow and painful.
During the first year of the decade, agricultural and
industrial production fell sharply, and both inflation
and unemployment rose rapidly. Many Bulgarians suffered
badly when prices rose and an acute shortage of grain
and energy arose. Many residents survived growing in
their own garden. Foreign debt escalated.
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Stopped reforms
In order to prevent an economic collapse, the
government signed an agreement with the International
Monetary Fund (IMF) on privatizations and financial
tightening in exchange for loans. However, political
instability with several changes of government caused
the reform work to stop. The economic crisis culminated
in early 1997 after the IMF suspended its payments as a
result of promised banking system reforms and a series
of privatizations had not been implemented.
The bourgeois government that took office in 1997,
with the support of the IMF, accelerated the transition
to a market economy. A decisive measure was the
establishment of a special currency control body, lev,
which was linked to the German D mark (later linked to
the euro). The privatization of state-owned companies
was also accelerated.
The measures involved an economic recovery. In 1998,
GDP grew for the first time since 1989, inflation slowed
and the exchange rate stabilized. After several years of
large deficits, the state budget came into balance,
partly due to increased tax collection. It was mainly
the private services sector that contributed to the
upturn, while industry and agriculture were still
struggling with major restructuring problems.
During the first years of the 2000s, growth was good,
unemployment fell and hundreds of new small businesses
were started. Banking confidence was restored after
restructuring and privatization of the banks. When the
negotiations for EU membership were completed in 2004,
foreign investment increased significantly. But the
problems remained great with widespread corruption and
the involvement of organized crime in the economy.
The economy is braking
Concerns could be seen on the horizon even before the
international financial crisis hit in the fall of 2008.
Inflation had started to rise again, partly because of
higher food and fuel prices. Productivity in industry
and agriculture was still low and foreign debt high.
The financial crisis caused the economy to slow down,
just like in the outside world. Growth, which for some
years was at just over 6 percent a year, was negative.
Although the growth curve was soon on plus again, the
pace became much slower than before. Foreign investment
was lower. The debt crisis in the euro area countries -
not least the important trading partner Greece -
contributed to the inertia.
The government took measures, such as cuts in health
care and education. For many Bulgarians, the standard of
living fell for several years with rising costs without
real wage increases.
In 2014, trade with Russia and Ukraine also
decreased, due to the crisis there. In addition, the
banking system was rocking. So-called bank riots
occurred when savers in panic tried to withdraw their
money because of rumors in social media of an impending
collapse. According to the authorities, conscious rumor
spread behind the rush. The result was Attland's fourth
largest bank, CCB, went bankrupt. The largest co-owner
was accused of fraud and fleeing. Account holders lost
their savings and because many public bodies had money
in the bank, taxpayers were also affected.
FACTS - FINANCE
GDP per person
US $ 9,273 (2018)
Total GDP
US $ 65 133 million (2018)
GDP growth
3.1 percent (2018)
Agriculture's share of GDP
3.6 percent (2018)
Manufacturing industry's share of GDP
14.4 percent (2018)
The service sector's share of GDP
59.2 percent (2018)
Inflation
2.5 percent (2019)
Government debt's share of GDP
20.4 percent (2018)
External debt
US $ 40,438 million (2017)
Currency
Lev
2008
July
The EU freezes the payment of aid
The European Commission freezes the payment of around EUR 500 million in
promised support to Bulgaria due to continued widespread corruption and
organized crime.
April
New minister responsible for EU support
A new deputy prime minister post is set up. The prime minister's primary task
is to oversee the management of EU support. The decision is made after the EU
Commission has highlighted a lack of transparency in Bulgaria's handling of EU
money.
The Interior Minister is forced to resign
April 13
Interior Minister Rumen Petkov is forced to resign after a parliamentary
inquiry has revealed links between high-ranking representatives of the Interior
Ministry and leaders in organized drug trafficking. In addition to Petkov, three
other ministers will also be replaced in a refurbishment in the government.
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