Economic Figures
Bulgaria's economy is in good shape; 2006 marked the ninth successive year of growth since the 1996/97 financial crash. Consumption and GDP are growing, investment, both foreign and overseas, is breaking records, unemployment levels, though still high in relative terms, are falling and imports and exports are continuing to increase at a robust rate. |
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In 2006 the Foreign Direct Investments (FDI) reached a record high of EUR 4,015 million. This is an increase of more than 70% in comparison to 2005. The FDI is boosted primarily by foreign property purchases, which accounted for 30% in the total investment flow for 2006 and more than doubled in comparison to 2005. Nevertheless, the FDI in manufacturing also indicated quite a serious growth accounting for EUR 777 million in 2006. This is almost 20% of the total FDI flow for the last year.
The industrial sector, which includes construction, achieved an annual growth of 8.3% in 2005 and 2006, as well as the tourism sector. However, challenges do remain: inflation is still high, 4.3% annual growth (state: end 2006) and the current account deficit stood at a record of EUR 3.88 billion in 2006 (EUR 2.43 billion in 2005), representing around 16% of GDP. In the future, Bulgaria's policymakers will have to negotiate the balance between caution and growth. Meanwhile there is a debate when Bulgaria will join the Eurozone – estimates differ between 2010 and 2012.
A solid role in this quite important trend has been played by the strong political commitment of the government and other state institutions in further pursuing a stable macroeconomic policy, reforms in pro¬moting the principle of rule of law and specific market measures encouraging the country.
Opportunities for Investors
EU-Member-State Bulgaria joined the Community Internal Market that already counts nearly 500 million people and has a GDP of around EUR 10.8 trillion. In this enlarged area Bulgaria makes its own development contribution, which should be considered with the comparative advantages of the country in mind: its specific geographical position, the quality of its labor force, and cultural specificity. Taking into account all these, the country has the potential to attract further investments in the real estate, tourism, agriculture, and industry sector, continuing the trend of the last several years. It is also important to point out that the infrastructure in Bulgaria is still underdeveloped, and a lot of funds may be needed for the growth of this sector.
Given the framework provided by the Lisbon strategy for growth and sustainable development in the EU, Bulgaria has the potential to develop within the high technology sector, using its well-educated human resources, which should be retained in the country to the extent possible. However, it must be kept in mind that Bulgaria is a market economy, and the particular sectors depend on the specific market situation.
Investment Climate in Bulgaria:
Predictability
> Five year average GDP: growth of 5.3%
> Budget surplus, low inflation, currency peg to EUR
> 90% private economy
> EU accession in 2007, NATO member
> Investment grade rating BBB+ (S&P/Fitch)
> Foreign direct investment at 16.7% of GDP (EUR 4.1 billion in 2006)
Quality
> 7% of workforce has engineering degrees
> Motivated and entrepreneurial attitude
> Strong institutional support for foreign investors by IBA
> No restrictions to capital flows
> Ample opportunities for all-season outdoor recreation
> Diverse cultural heritage and art activities
> World renown food and beverages
> According to the Global Services Location Index 2007 (AT Kearney) Bulgaria is the only European country in Top 10 according to financial attractiveness, people skills & availability and business environment
Competitiveness
> Highly qualified work force
> 10% corporate tax rate
> Tax exemptions and investment incentives for qualified invest¬ment
> Among lowest operational cost in a European market economy
> Duty free trade covering markets with over 550 million customers
> 61 double taxation treaties and 66 agreements on the mutual protection and promotion of foreign investment
Southeast Europe´s leader in attracting FDI
Source: Invest Bulgaria Agency
Education, Personnel and Labor Market
The education level in Bulgaria is among the top five in Europe. The country has compulsory school education up to the age of 16, 70% of the students speak English. Higher education is provided by 51 universities and colleges, whereas 15% of the population has university degrees.
In Bulgaria there are 3.5 million economically active working people, counting 53.5% of the population. 56.8% of the employed population is working in the service sector. The unemployment rate has been constantly decreasing during the last years and was recorded at 6.6% for the first three months of 2007. Only 8.4% of the unemployed population are people with higher education.
According to the law in Bulgaria there are 12 monthly salaries to be paid per year. The income tax is on a progressive rate from 0% to max 24%. The social security contributions are to be paid partly by the employer (22.125%) and partly by the employee himself (11.375%).
Notice: From January 2008 Bulgaria is changing its tax map, and is adopting a fixed flat tax rate on income of 10%.
From next year on, the minimum monthly wage in Bulgaria will be 220 BGN (approx. 113 EUR), up from currently 180 BGN (approx. 92 EUR), while the statutory expenses for free-lancers will be at least 25%. The current tax-exempt income minimum of 200 BGN will be revoked.
According to a Mercer survey, salaries in Bulgaria will be raised by 9.3% in 2008, which will be a 4.9% increase above inflation. These figures rank Bulgaria at one of the top positions in Europe concerning to salaries.
»Brain drain«, the loss of a country's most talented and skilled workers to more attractive overseas employment, is a common challenge for developing economies. In Bulgaria, however, the private sector is taking the initiative to reverse this process, and brings skilled Bulgarian emigrants back home.
A study on human capital by the Lisbon Council, a Brussels-based think tank, concludes that for Bulgaria, along with Croatia and Poland, »there is a realistic chance of being stuck in relative poverty compared to the European average« and recommends heavy investments in human capital.
In addition to changing demographics – Bulgaria's working population is forecast to drop by 26% between 2005 and 2007 – and insufficient investment in education, persistent »brain drain« is one of the key causes of the human capital problem, according to the report.
A World Bank report published in January this year states, that 688,000 Bulgarians or 7.7% of the population, emigrated from the country between 1989 and 2005. Following the country's accession to the EU at the beginning of this year, the rate of emigration was expected to increase, although actual numbers did not reach the rates many analysts predicted.
A survey by BSS Gallup reported, that only 46,000 Bulgarians have serious intentions of working in another country. However, many of these will be amongst the most skilled, especially in key sectors like information technologies.
Competent On-site Personnel Consulting
HILL International Bulgaria entered the Bulgarian market in 1989, and was the first international personnel consultant in the country. During more than 15 years we have gained considerable experience, and have been successfully cooperating with both national and international companies. Some of our clients are BMW, Danone, Palfinger, Schneider Electric, Xerox, WABCO etc.
Currently among the top three personnel consultants in Bulgaria, HILL is very well known on the market both by candidates and clients due to the longstanding experience, as well as the constant media presence. HILL International Bulgaria is well respected and considered as a qualified personnel consulting company working mainly with foreign companies, and searching personnel for middle & top management positions. HILL is not focused and/or specialised in a particular business branch or position, but executive search for all sectors.
HILL International Bulgaria is assisted in its work by the experience and know-how of the HILL Group. Over 30 years of personnel and management consultancy, scientific methodology, and an extensive network in Europe and Central Asia enables HILL to provide successful consultancy in the areas of personnel and management.
For further information and details please contact:
HILL International Bulgaria
Alexander Alexandrov, Managing Partner
Irena Joteva, Executive Director
Complex Gotse Delchev, bl. 53E, entr. 1
Sofia 1404
Phone +359 2 958 1920
E-mail hill@hill.bg
www.hill.bg
