Bulgaria’s economy grew unexpectedly by 3% in 2015. This was due to the fact that the EU economy has been recovering steadily. According to most economic forecasts, the EU development rate in 2016 would be similar to the one registered last year and in this sense we can’t expect that the growth of the Bulgarian economy would accelerate automatically, because the external factors do not favor a higher increase, Bulgarian economist Georgi Angelov from the Open Society Institute told Radio Bulgaria. The only way for Bulgaria to reach the high target set by the cabinet is to speed up the reforms, improve the business environment and the investment climate, Georgi Angelov further said. Bulgaria’s authorities pinned their hopes on local consumption to become the main engine of growth in 2016:

“We have a reason to believe that local consumption would increase this year, mainly because of the improvement of the labor market. The unemployment levels dwindled significantly in the past one or two years and the fear of the Bulgarian households that they may lose their jobs has decreased. On the other hand, the interest rates on bank loans and deposits fell sharply and it is not that profitable for people to save money in bank accounts anymore. Perhaps, it is better for a young Bulgarian family which pays rent to take a mortgage loan and buy its own property. Moreover, the commercial banks are to go under a procedure of asset quality review and when these stress tests are over, they would be much more inclined to offer loans to the Bulgarian households and companies. This would boost consumption, especially investment demand, which would create economic growth.”

Georgi Angelov voiced an opinion that due to the sharp increase of the minimum monthly wages, there is an imbalance at the labor market in different Bulgarian regions. In Bulgaria’s big cities, especially in the capital Sofia, the rapid growth of the minimum salary does not influence the labor market, because the salaries there are much higher than the minimum wages. However, in other Bulgarian regions, where the minimum monthly salary is close to the average salary, the labor market experiences problems and unemployment in those regions grows.

In Georgi Angelov’s view, Bulgaria also faces the challenge to reduce the share of the shadow economy, which currently comes up to 30% of the economy, which requires structural reforms. The Bulgarian citizens would see the point of paying social security contributions and taxes, if they see better roads, more schools and kindergartens, better healthcare system, etc. When people see the real effect of their money, they would be more inclined to work for the state, rather than protest in the streets, as it recently happened against the higher price of the vignette fees. The citizens should receive the so-called Value for Money, i.e. when you pay money to the state, you should receive the relevant quality of service, Georgi Angelov commented.

Does Bulgarian business benefit from the weak Euro?

“The Bulgarian business benefited significantly from the weak Euro. However, it benefited indirectly through the economic effect of the Eurozone, because when the German, the French or the Austrian companies for instance are more competitive and export more to third countries, their subcontractors in Bulgaria also perform better. In other words, the Bulgarian companies export more to Europe due to the fact that the weak Euro boosted the competitiveness of the European export. The higher export is the main engine of economic growth in Bulgaria.”

Can Bulgarian companies rely on spare financial resource for investments and development due to the low fuel prices?

“The price of fuels and energy is of high significance for Bulgaria’s economy, because basically this country does not produce fuels and relies mainly on imports. In other words, the fuel price is a kind of tax levied on the Bulgarian companies and households. The cheap petrol results in lower gas prices. As a result, the price of the central heating decreases and the energy sector develops better. Therefore, the households have more disposable income and the expenditures of the local firms are lower, which allows them to redirect these spare funds for investments. The financial effect of the low prices of fuels is estimated at EUR 350-500 million per year, which is a serious stimulus for the Bulgarian economy.”

English version: Kostadin Atanasov