% of GDP
Bulgaria earned its independence from the Ottoman Empire in 1878, but having
fought on the losing side in both World Wars, it fell within the Soviet sphere
of influence and became a People's Republic in 1946. Communist domination ended
in 1990, when Bulgaria held its first multi-party election since World War II
and began the contentious process of moving toward political democracy and a
market economy while combating inflation, unemployment, corruption, and crime.
Today, reforms and democratisation keep Bulgaria on a path toward eventual
integration into NATO and the EU - with which it began accession negotiations in
Update No: 081 - (01/02/04)
Heritage of a tricky past
Bulgaria before the war was predominantly agricultural, with virtually no heavy industry. In Communist Bulgaria following World War II (1939-1945), all industrial enterprises were nationalised and operated under a series of five-year economic plans, modelled after the Soviet system, with financial aid from the USSR. Heavy industry was the government's highest priority. Bulgaria enjoyed one of the most prosperous economies of the Soviet bloc.
In 1990 Bulgaria began converting from a socialist to a market economy, which was expected to result in a positive economic reversal. The reversal did not happen, however, leading to popular dissatisfaction with the social effects of the reforms. Consequently, the legislature did not enact laws that would have resulted in mass privatisation, and the major industrial sectors remained under state control. Some reforms and privatisation had begun, however, and in 1994 more than twice as many state-owned enterprises were privatised than in 1993.
Bulgaria suffered a major economic downturn in 1996 and 1997, with triple digit inflation and GDP contraction of 10.6% and 6.9%. The downturn in 1996-7 led to the fall of the then socialist government. The conservative government - which took office in May 1997 after pre-term parliamentary elections - stabilised the economy and promoted growth by implementing a currency board, practising sound financial policies, invigorating privatisation, and pursuing structural reforms. Additionally, strong assistance from international financial institutions - most notably the IMF which approved a three-year Extended Fund Facility worth approximately $900 million in September 1998 - played a critical role in turning the economy around.
The current government, elected in 2001, led by Simeon II, the former monarch of the country in the 1940s as a boy, has pledged to maintain the fundamental economic policy objectives of its predecessor, i.e., retaining the Currency Board, practising sound financial policies, accelerating privatisation, and pursuing structural reforms.
A new $300 million stand-by agreement negotiated with the IMF at the end of 2001 in succession to the previous one is helping the government maintain economic stability as it seeks to overcome high rates of poverty and unemployment.
Red vote ends the honeymoon for Simeon 11
There is a widespread apathy in Bulgaria about politics. Recent municipal elections saw turn-out at the lowest ever since the end of communism at 32%. For sound reasons nobody thinks anyone can really master the country's grave problems of transition.
The latest party to arouse disillusionment is only three years old, the National Movement of Simeon-11. The Bulgarians have delivered their verdict on the 800 days which Premier Simeon-11 Saxe-Coburg said in 2001 he would need to double their living standards.
The answer is a dramatic thumbs down at late October's municipal elections. These were won by the former communists, who gained 33% of the votes. The Bulgarian Socialist Party (PSB) was the clear winner, while the conservative opposition United Democratic Forces won second place with 21%. "There has been a clear winner in these elections," said Andre Raiechev, of the Gallup Poll Organisation. "That is the PSB. A third of Bulgaria has voted red."
The National Simeon 11 Movement of the premier came third on 11%. Its ally in the coalition government, the Movement for Rights and Freedom, mostly representing Bulgaria's 800,000 ethnic Turks, obtained 9%.
The result was a clear setback for the centre-right coalition that does not look likely to survive beyond the next parliamentary elections in two years' time.
Economy in the doldrums
The explanation is not hard to find. Despite positive growth rate figures for GDP of around 4% annually in the period since March 2001 when the government came to power, this has not shown up in people's living standards. Average salaries rose by 17% in the new government's period of office so far, to 143Ecu ($168) per month. A meagre result for a poor country, conclude the population.
Unemployment is in double figures at 12.98% of the work force, which is below the average for Central and Eastern Europe of 14.5%, and lower than in 2002 by 170,000 people, but too high for comfort.
Simeon is paying the price of raising expectations unduly in the electoral campaign of March 2001, now seen as a long time away. People were expecting a royal bounty and have got a beggarly response. There was in truth little chance of the former monarch keeping his word. Bulgaria will need time to turn the corner in terms of prosperity for the bulk of the population.
An austere budget deficit of under one per cent of GDP wins the applause of the international institutions, but not of the electorate. Penny-pinching impresses the bankers, but not the poor and needy, who abound in the Balkan country.
Foreign investment doubled in 2003
One bright feature is that Bulgaria is at last attracting considerable interest by foreign investors. It has been low down on their priorities, compared with Hungary and the Czech Republic, which have both seen inflows of FDI of over $20bn since 1989.
Now Bulgaria is coming into their sights. The three big investor countries are Greece in first place with $692.6 million, Germany with $658.8 million and Italy with $605 million. Switzerland and Austria are also notable investors, pushing the total figure for accumulative FDI above $3bn.
Foreign investments to Bulgaria over 2003 hit a 13-year record high, an MP from the country's ruling Simeon II National Movement (SIIINM), Valeri Tsekov, said recently. Foreign investments for 2003 represent half of all foreign investments since 1990.
Tsekov said that the four percent growth in the gross domestic product (GDP) in 2003 is another important sign of economic progress in the country. He also stressed decreased unemployment rates. "For the first time in six years, unemployment in Bulgaria dropped to less than 15%," Tsekov said.
SAPARD okays additional subsidies to farmers
Bulgarian farmers recently received subsidies under the European Union SAPARD programme worth a total of 94m Bulgarian levs. The sum is a fraction of an overall 327.8m lev-subsidy for a total of 902 projects that the programme has approved for Bulgaria. The money is being released gradually. SAPARD finances three-fourths of the subsidy, while the government provides the rest, chief of the Bulgarian SAPARD agency, Asen Drumev, said, BTA reported.
He said the total value of projects that SAPARD was partially supporting was 677.8m levs. Of all projects, worth a total of 196m levs, 381 have been completed, Drumev said. He further noted that the agency annulled 33 projects worth 25.4m levs, of which 11.4bn levs were subsidy funds.
10-month trade deficit reaches US$1.8m
Bulgaria's foreign trade deficit for the January-October 2003 period was recorded at US$1.8m, preliminary estimates of the National Statistical Institute (NSI) informed recently, BTA News Agency reported.
Commodity exchange in the period under review exceeded US$14m. Bulgaria exported goods for US$6.2m while the imports equalled some US$8m in the period under review, the statistics office said. Compared to the like period of the previous year, exports and imports grew by 32% and 38.6%, respectively. In the January-October 2003 period Bulgaria exported goods worth US$3.5m to the EU countries, 34.2% up from the same period the previous year. Imports from the EU were worth US$4.2m, 33.4% higher compared to the first 10 months of 2002.
Exports to the Central and Eastern European countries increased by 39.5% and imports by some 50% in a year. There was also a growth of exports to and imports from the Commonwealth of Independent States equivalent to 7.3% and 32.3%, respectively, the NSI data was cited by BTA News Agency as showing.
Britons keen on joint infrastructure projects
Bulgaria has been gradually attracting investment interest in the infrastructure sector by British enterprises. Latest reports by local BTA News Agency said that British companies are searching for Bulgarian construction partners in the implementation of joint projects in infrastructure and water and sewerage, the Bulgarian Regional Development and Public Works Ministry said in a statement. According to the ministry, the Britons are also interested in acquiring concessions for Bulgarian highways. The cooperation opportunities were the focus of a recent meeting between Regional Development and Public Works Minister, Nigel Griffiths, BTA News Agency reported. Upon completion of the meeting, the minister said that the country could tap into Britain's experience in water management, the introduction of tolls and public-private partnership on big infrastructure projects.
New nuclear plant to compensate for closing Kozloduy reactors
During the National Assembly parliamentary control session, Prime Minister Simeon Saxe-Coburg said that if the third and fourth reactors of the Kozloduy nuclear power plant are indeed closed, the results of the peer review will be used as an argument for receiving additional technical and financial assistance.
Daniela Kusovska reported for Khorizont Radio: The prime minister said that Bulgaria's membership in the EU and the development of nuclear power engineering are compatible, and therefore the government has unfrozen the project on constructing the Belene nuclear plant. Simeon Saxe-Coburg said that he expected the minister of energy to submit a report to the Council of Ministers by the spring of 2004 on the results of the preliminary studies related to that project.
The prime minister said that various investors have already shown interest in the Belene nuclear plant construction. He said that Bulgaria was extremely satisfied with the decision of the Council of Europe to set 1st January 2007 as the date for Bulgaria's EU admission. The prime minister emphasized that this would not have been the case had not been closed the Energy Chapter, and added that reopening the chapter would not be beneficial from a political or economic point of view.
Bulyard consortium ratifies JV with Navigation Maritime Bulgare
The Bulyard consortium, which won the tender to gain 75% of Bulgaria's Varna shipyard equity, and Navigation Maritime Bulgare recently signed the contract for the setting up of a joint venture with Varna shipyard assets, reports New Europe.
In December 2003 it was announced that the Bulyard consortium will transfer US$1m in advance to Navigation Marine Bulgare. Bulyard consortium, one of the two companies, which advanced in the sale procedure, offered the highest price in the tender for Varna shipyard assets. The sweetened bid of the company stands at US$16.666m, improving its offer by US$2.333m.
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