Bulgaria continues to be seen by many investors as an attractive low-cost investment destination, with government incentives for new investment. The country offers some of the least expensive labor in the European Union (EU) and low and flat corporate and income taxes. However, Bulgaria has the lowest labor productivity rate in EU, and in the medium term, productivity is further at risk due to a rapidly shrinking population.
The government expects to adopt the Euro in early 2024, following its joining the European Exchange Rate Mechanism (ERM II) in July 2020 and the EU’s Banking Union in October 2020. The adoption of the euro will eliminate currency risk and help reduce transaction costs with some of the country’s key European trading partners.
In 2020 Bulgaria suffered from the COVID-19 pandemic and related shutdowns, although the impact on the economy was less severe than in many other European countries. Deficit spending in 2020 was three percent of GDP, the lowest in the EU. Tourism, logistics, the service industries, and the automotive sector were particularly hard hit by the pandemic. The Bulgarian economy declined 4.2 percent in 2020, and is expected to rebound in 2021, with estimates ranging between 2.5 and 4.1 percent growth. This recovery is expected to be driven by higher wages, EU-funded post-COVID public investment funds, and export increases.
Bulgaria will receive EUR 6.2 billion over a six-year period (2021-2026) from the EU’s post-COVID recovery grant funds to improve its economy in areas including green energy, digitalization, and private sector development.
There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted. There is strong growth in software development, technical support, and business process outsourcing. The Information Technology (IT) and back office outsourcing sectors have attracted a number of U.S. and European companies to Bulgaria, and many have established global and regional service centers in the country. The automotive sector has also attracted U.S. and foreign investors in recent years.
Foreign investors remain concerned about rule of law in Bulgaria. Along with endemic corruption, investors cite other problems impeding investment including difficulty obtaining needed permits, unpredictability due to frequent regulatory and legislative changes, sporadic attempts to negate long-term government contracts, and an inefficient judicial system.
|TI Corruption Perceptions Index||2020||69 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||61 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||37 of 129||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD 756||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||USD 9,750||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|