EU-Report Accession Bulgaria

Summary of economic developments since 1997

Following the economic crisis in 1996/97 with negative real GDP growth, the currency board arrangement introduced in July 1997 has helped to stabilise the economy and to achieve real GDP growth of close to 4% on average since 1998. Inflation came down from above 1,000% on average in 1997 to 9.8% on average since then. Fiscal discipline kept the deficit below 1% of GDP in all years, which gradually brought down public debt. A slowly rising share of private investment in GDP and substantial inflows of foreign direct investment indicate an improving business climate. Foreign direct investment has also been the main source of an orderly financing of high current account deficits. However, as a consequence of structural reforms, but also sometimes of their late implementation, unemployment has kept on rising until 2001 and is slowly declining since then.

Substantial progress has been made with the restructuring of the economy and privatisation. Enterprises representing more than half of all state-owned assets have been sold. New privatisation procedures were put in place in April 2002 to provide clearer rules and greater transparency for the remaining 2,000 firms or so which are majority state-owned. A strategy for the liberalisation of the electricity sector was started in 2002 with substantial price increases and the privatisation of distribution companies. The conditions for business in Bulgaria have improved although substantial efforts are still required to enhance the efficiency of the public administration and the judicial system regarding corruption, red tape, tax and customs procedures and bankruptcy rules. The largely foreign-owned banking sector is developing in terms of credit growth and savings deposits, and only one major state-owned bank remains to be privatised. The capital market is still underdeveloped.

Average per capita income is low at only 28% of the EU average (in purchasing power standards). However Bulgaria made good progress in the catching-up to EU income levels. The employment rate of the working-age population fell from 54.5% in 1997 to 50.7% in 2001. The unemployment rate increased from 13.7% of the labour force to 19.9%. More than 60% of the unemployed are long-term unemployed. Unemployment rates for men have increased slightly more than for women, and almost 40% of the persons under 25 years old are unemployed. Regional income differences are small, ranging from 23% to 28% of the EU average, with the exception of the Southwest region, which includes Sofia, where the figure is 36.5% (data for level-2 statistical regions in 1999). Regional differences in unemployment are more pronounced. While in the Southwest region the unemployment rate was 9.7%, in all other regions it was above 20%, reaching up to 32.8% in the Northwest (data for level-2 statistical regions in 2001).

© EU Commission -- 2003-03-30