About Bulgaria

Bulgaria is a country located in Southeast Europe, bordered by Romania to the north, Serbia and North Macedonia to the west, Greece and Turkey to the south, and the Black Sea to the east. Its capital and largest city is Sofia. Founded in the 7th century, Bulgaria is one of the oldest states on the European continent. It is intersected by historically important routes from northern and eastern Europe to the Mediterranean basin and from western and central Europe to the Middle East. Before the creation of the Bulgarian state, the empires of ancient Rome, Greece, and Byzantium were strong presences, and people and goods traveled the land with frequency. Bulgaria became a member of NATO in 2004 and a member of the EU in 2007. After a 13-year wait, on 31 March 2024, Bulgaria became Schengen member.

1. History and Culture: Bulgaria has a rich history dating back to ancient times, with influences from Thracian, Greek, Roman, Byzantine, and Ottoman civilizations. The country has a diverse cultural heritage, including traditional music, dance (like the famous horo), crafts, and cuisine.

a. Ancient Civilizations:
- The Thracians, ancient Greeks, Scythians, Celts, Romans, Goths, Slavs, Varangians, and Bulgars have all left their mark on Bulgaria's heritage.
- Thracian artifacts, including temples, tombs, and golden treasures, showcase their ancient rituals and customs.
- The Varna Necropolis site holds the world's oldest worked gold, dating back to the 5th millennium BC.

b. Cultural Contributions:
- Bulgaria played a pivotal role in Slavic Europe during the Middle Ages, influencing literature and culture through the Preslav and Ohrid Literary Schools.
- The Cyrillic script, widely used today, originated in Bulgaria in the tenth century.
- Notable individuals like John Atanasoff (considered the father of the digital computer) and talented artists helped popularize Bulgarian culture globally.

c. Music Tradition:
- Bulgaria boasts a long-standing musical heritage dating back to the early Middle Ages.
- Yoan Kukuzel, an early composer, gained fame for his work "Polieleion of the Bulgarian Woman."
- Church singing traditions, both monodic and choral, have thrived for over a thousand years in the Bulgarian Orthodox Church.

d. Intangible Cultural Heritage:
- Ancient customs, such as Thracian fire dancing, continue to be preserved and are recognized by UNESCO as part of Bulgaria's cultural legacy.

2. Language: The official language is Bulgarian, which uses the Cyrillic alphabet.

3. Economy: Bulgaria has a mixed economy with a high-income upper-middle class. The country has experienced significant economic growth since transitioning to a market economy in the early 1990s.

4. Tourism: Bulgaria is known for its beautiful Black Sea coastline, ski resorts in the Balkan Mountains, and historical landmarks such as the Rila Monastery and ancient Roman ruins.

5. Politics: Bulgaria is a parliamentary republic, and a member of the European Union (EU) since 2007.

a. System of Government:
- Bulgaria operates as a parliamentary representative democratic republic.
- The prime minister serves as the head of government, while the president holds the position of head of state.

b. Power Distribution:
- Executive power lies with the government, led by the prime minister.
- Legislative power is shared between the government and the National Assembly (parliament).

c. Historical Context:
- After the fall of communism in 1989, Bulgaria transitioned to a democratic society.
- The country aimed to join the European Union and NATO, aligning its political goals with these alliances.

d. Challenges and Achievements:
- Bulgaria has generally good freedom of speech and human rights records.
- However, political corruption and organized crime remain challenges.
- The media sector remains pluralistic but faces pressure to provide government-friendly coverage.

6. Nature: The country boasts diverse landscapes including mountains, forests, rivers, and coastal areas, making it attractive for outdoor activities and eco-tourism.

By the beginning of the 21st century, with the government aggressively privatizing state-run industries, the restructured Bulgarian economy had markedly improved (aided in 2007 by the country’s ascent to full membership in the EU). GDP increased at an average annual rate of more than 4 percent during the first decade of the new century. Business in Bulgaria presents a variety of opportunities and challenges, reflecting its position as a developing market economy within the European Union. Here are some key aspects of business in Bulgaria:

1. Economic Overview: Bulgaria has a mixed economy with a large private sector and a growing number of foreign investments. Industries such as manufacturing, energy, agriculture, tourism, and services play significant roles in the economy.

Bulgaria’s economy grew by 0.5 per cent in the second quarter of the year, according to preliminary data announced by the National Statistical Institute (NSI) on 5. September 2024. The figure was in line with last month’s NSI flash estimate. Compared to the same period of 2023, Bulgaria’s economy grew by 2.1 per cent in the second quarter, slightly higher the two per cent figure in the NSI flash estimate. In real terms, gross domestic product (GDP) in April-June was 47.68 billion leva, or 24.38 billion euro, NSI said.

NSI’s seasonally-adjusted preliminary data showed domestic consumption rose by 0.9 per cent during the second quarter, and was three per cent higher on an annual basis. Gross fixed capital formation shrank by 1.3 per cent in April-June, but it was 3.6 per cent up compared to the second quarter of 2023. Bulgaria’s growth target for 2024 is 3.2 per cent, while the European Commission projected 1.9 per cent growth for Bulgaria’s economy in its spring forecast.

Consumer prices in Bulgaria rose by 1.2% in September 2024 compared to the same period last year (chart), according to preliminary National Statistical Institute (NSI) data. Month on month, the Consumer Price Index (CPI) decreased by 1%. Consumer prices, which stood at 4.7% in December 2023, continued their decline throughout 2024. A year earlier, in September 2023, annual CPI inflation was 6.2%. The fastest annual increase in prices was for restaurants and hotels, which rose by 7.2%. The prices for education moved up by 6.1%, followed by alcoholic beverages and tobacco (5.6%) and other goods and services (3.5%).

In contrast, communications experienced a downturn, with prices dropping by 4.4%, while clothing prices decreased by 0.32% year on year. The inflation rate since the beginning of the year as compared to end-2023 was 0.1%. The NSI's data on the Harmonised Index of Consumer Prices (HICP) showed a 1.1% monthly decrease and a 1.5% annual inflation rate.

2. Business Environment: The business environment in Bulgaria has improved over the years, with reforms aimed at enhancing competitiveness and attracting foreign investment. The country offers relatively low operating costs compared to Western Europe, which can be advantageous for businesses.

3. Legal and Regulatory Framework: Bulgaria adheres to EU regulations and standards, providing a stable legal environment for businesses. However, bureaucracy and corruption can still pose challenges, although efforts are ongoing to improve transparency and efficiency.

4. Foreign Investment: Bulgaria has actively sought foreign investment, particularly in sectors like information technology, outsourcing, automotive, and renewable energy. The government offers incentives such as tax breaks and subsidies to attract investors.

- FDI Inflows:
- Foreign direct investment in Bulgaria in the first seven months of the year stood at 604.3 million euro, the equivalent of 0.6 per cent of the gross domestic product (GDP), statistics from the Bulgarian National Bank (BNB) showed on September 19. In the same period of 2023, FDI was 2.51 billion euro, although BNB originally reported 2.06 billion euro, which was revised upward later.

Investment in equity, including in the real estate sector, was 236.9 million euro (compared to 423.2 million euro in January-July 2023) and the BNB figures showed 853.2 million euro in re-invested earnings (compared to 2.08 billion euro for the first seven months of last year.)

- Key Sectors:
- The most active sector for inbound foreign investment in Bulgaria remains technology, media, and telecommunications.
- Other significant sectors include construction, real estate, and financial services.

- Investment Climate:
- Bulgaria offers several advantages for foreign investors:
- Low corporate tax rate: At 10%, it's one of the lowest in the region.
- No government screening: Foreign investments are not subject to government approval.
- No legal limits on foreign ownership: Foreign entities receive the same treatment as national companies.
- Challenges include a shortage of skilled labor, corruption, regulatory unpredictability, and concerns about the rule of law.

- Investment Coordinating Body:
- The Invest Bulgaria Agency (IBA) provides information and administrative services to potential foreign investors.

5. Infrastructure: Infrastructure in Bulgaria has seen significant development, especially in transportation and telecommunications. The country's strategic location provides access to markets in Europe, the Middle East, and Asia.

6. Workforce: Bulgaria has a well-educated and relatively low-cost workforce, making it attractive for companies looking to outsource or establish operations in sectors requiring skilled labor.

7. Challenges: Despite the positives, challenges include bureaucracy, a sometimes slow judicial system, and lingering issues with corruption. Additionally, some industries face skills shortages, particularly in specialized fields.

8. Support for Entrepreneurs: There are initiatives and programs to support entrepreneurship and startups in Bulgaria, including business incubators, accelerators, and funding opportunities from both public and private sources.

Bulgaria is planning to transition from the leva (BGN) to the euro (EUR) in just over a year as part of its strategy to enter the Eurozone. While the exact date remains uncertain, the implications of this shift are clear. The newly adopted euro law outlines the process and addresses potential consequences of further delaying Eurozone membership.

Under the proposed changes, if a person's current salary is 1,500 leva, it will convert to approximately 766.94 euros once Bulgaria joins the Eurozone. Prices will similarly be halved. The specifics of this transition are detailed in the Law on the Introduction of the Euro, which was passed by the National Assembly in early August 2024 and subsequently published in the State Gazette.

Initially, January 1, 2025, was considered a target date for adoption, but officials are now indicating a more realistic timeframe of July 1, 2025. Nevertheless, some forecasts point to early 2026 as a more likely scenario, particularly given the current political landscape. The primary barrier to adopting the euro is the country's high inflation rate.

Overall, Bulgaria presents opportunities for businesses looking to expand into Eastern Europe or leverage its strategic location within the EU. However, thorough research and understanding of local regulations and market conditions are crucial for success.

Indotco International

About Bulgaria