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Bulgaria - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Sofia
Area:: 111 km2
Total Population:: 7.306
Annual growth rate:: -1.00%
Density:: 67.00/km2
Urban population:: 74%
Population of Sofia (1.455), Plovdiv (350), Varna (320), Burgas (190), Ruse (160)
Official language: Bulgarian
Other languages spoken: Many Bulgarians have some level of Russian language comprehension. German and French are also widely spoken.
Business language: Russian, English, German and French. Turkish is also used for business in the South.
Ethnic Origins:: Bulgarian 83.9%, Turk 9.4%, Roma 4.7%, other 2% (including Macedonian, Armenian, etc).
Beliefs: Bulgarian Orthodox 82.6%, Muslim 12.2%, other Christian 1.2%, other 4% (2001 census).
Telephone codes:
To make a call from: 0
To make a call to: +359
Internet suffix:: .bg
Type of State::
Republic state based on parliamentary democracy working under a pluriform multi-party political system.
Type of economy::
Upper-middle-income economy, Ex-Transition country
The country is a crossroads between Europe and Asia.

Economic overview

Bulgaria experienced a strong growth starting from 1996. Successive governments showed a commitment to establishing tax and economic reforms, but they did not manage to control inflation and the current account deficit. During this time, Bulgaria was attracting a lot of FDI; however, the country has been badly hit by the financial crisis of 2008. As a member of the EU since 2007 and therefore subject to certain economic criteria, Bulgaria has since introduced a series of measures aimed at improving its economy and reducing its public deficit.

The 2009 recession materialized in a 5.5% contraction of the GDP and an unemployment rate that has gone from 5.6% in 2008 to 12.3% in 2013. The economic growth has been close to zero in 2013 (0.5%), after a growth of +0.8% in 2012, in a very tough economic context due in particular to a succession of political crisis. However, growth could reach 1.7% in 2014 according to the EU.

Today enjoying relative financial stability and having one of the lowest debts on the continent, of only 19,4% of GDP in 2013, Bulgaria - since its entrance into the EU - has continued its rapid transition, which was however restrained by the 2011 European crisis. The Bulgarian authorities have now made fiscal governance a priority and the government has implemented an austerity plan to deal with the consequences of the crisis, capping state expenditure, limiting the fiscal deficit to 3% and lowering the public debt.

The country faces many other challenges, including problems of corruption within the administration, a weak judicial system and the spreading of organized crime.

Main industries

Traditionally an agricultural country, Bulgaria is now considerably industrialized. In 2013, the agricultural sector contributed around 5.3% to the GDP and employed 6.5% of the active population.

The country has a skilled and inexpensive workforce. Nearly a third of the population works in the industrial sector. Bulgaria's main mineral resources include bauxite, copper, lead, zinc, coal, lignite (brown coal), iron ore, oil and natural gas.

Industry still depends on heavy manufacturing sectors (metallurgical, chemical, machine building), which were developed during the socialist period. However, the most dynamic sectors are textile, pharmaceutical products, cosmetic products, and now, the mobile telephone industry and software industry. The manufacturing industry accounted for 31.2% of the GDP in 2013. It currently employs 32.5% of the active population.

The tertiary sector contributes to 63.5% of the GDP and employed 61% of the active population in 2013.

Foreign trade overview

Since joining the European Union, Bulgaria has experienced considerable growth of its trade, despite its large trade balance and recurring deficits. Bulgaria is more and more dependent on other European countries successes and in particular of Greece and Italy, countries currently facing strong difficulties. The EU countries have represented more than 50% of its exports and imports in 2013. The Bulgarian government has a proactive European attitude and trade remain critical to the development of the country.

Bulgarian exports go mainly to Germany, Turkey, Italy, Romania, Greece and France. Bulgaria mainly exports semi-processed goods and unprocessed products. The country also produces and export coal, iron, oil and gas. But the most dynamic sectors are textile, pharmaceuticals, software and mobile phone technologies. The country's main imports are food products, fuel, energy and capital goods from Russia, Germany, Italy, Romania, Greece and Turkey. The rise in energy prices has made Russia the leading supplier of Bulgaria, followed by Germany and Italy.

Bulgaria's foreign trade was indirectly affected by the global economic crisis, insofar that Bulgaria's main partner countries, which are in majority European countries, reduced their orders. The current difficulties of the EU economies further worsen this situation, although Bulgarian exports have shown resistance and they are stagnating rather than regression. The case in point was Greece, which was severely affected by the financial crisis and, therefore, strongly reduced its imports from Bulgaria. Bulgarian foreign trade have resumed growth since 2012.

FDI

In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.

Bulgaria attracts a certain volume of foreign cash flows, but since 2009 their level has been badly affected by the global and European crisis, particularly in the sectors of construction, real estate, financial intermediation and manufacturing. Foreign direct investment fell notably due to the Greek crisis of 2011 and 2012, Greece traditionally being an important investor in Bulgaria. Moreover, the European crisis dried up capital flows significantly. Considering all the advantages that Bulgaria provides, notably its fiscal plan with one of the lowest tax rates in the area and its labor costs, the country remains well-placed for foreign investments to revive again in 2014. The revival will nonetheless only be driven by the improvement of the economic situation of the EU countries, particularly of Bulgaria's closest neighbors. In 2013, the inward flow of FDI totalled USD 1. 899 billion.

Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).

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