Bulgaria

Bulgaria was witness to several unprecedented developments in 2021. Despite the COVID-19 pandemic, Bulgaria held one presidential election in November 2021 and three parliamentary elections (in April, July and November of the same year). The country failed, twice, to elect a fully mandated executive and was governed from April to December by interim governments, each of which were appointed by the president. For the third election, voter turnout reached an unprecedented rate of 40%. The government was elected a week before Christmas, after broadcasted deliberations on policies. A detailed agreement between four parties of the coalition, which was published before being signed, was made public.

Despite these problems, from an economic policy standpoint, the year 2021 was a fairly good year.

The pandemic’s economic impact on Bulgaria accounted for a 3.8% decline in GDP per capita and 4.4% decline in real GDP. The EU averages for these indicators are -6% and -5.9%, respectively. This performance is due to the inertia of 2015-2019, when Bulgaria’s average GDP growth was 3.2%, while the OECD and EU-27 average for the same period was at 2.2%.

Bulgaria’s best-performing year was 2019, with GDP growth reaching 4.1% and GDP per capita reaching 3.92%. The EU average for both indicators in 2019 was at 1.6% and 1.98%, respectively.

In 2020 – 2021, the pandemic hit the Bulgarian labor market less severely. At the end of 2019, Bulgaria recorded a record low unemployment rate of 4.1% (i.e., similar to that observed in Estonia, Austria and Slovenia and lower than the EU average of 6.6%), though six other EU countries registered lower rates (Czechia, Germany, Malta, Netherlands, Poland and Romania). By the first quarter of 2021, unemployment increased by 50%, reaching 6.3%, falling again to 4.6% in December. According to official statistics and polling indicators, labor shortages remained unchanged during the pandemic and are still high. According to official labor statistics and business polls, some 30-40% of all job openings remain unfilled. Government policies that have set a national minimum wage and social security thresholds that incentivize informal contracts account in part for high unemployment rates in the country’s poorest regions and contribute to inequities in regional economic development.

Bulgaria’s membership in the ERM II and continued related commitments were tested by Bulgarian National Bank (BNB) policies aimed at mitigating the 2020 recession. For the period between April 2020 and March 2021, and with the approval of the ECB, the BNB placed a moratorium on the non-financial sector’s loan services (equivalent to 9% of GDP). The BNB and the government cooperated in fulfilling ECB 2019-stress test recommendations, and Bulgaria joined the European Banking Union in October 2020. The moratorium did not affect the stability of the banking sector or increase the volume of non-performing loans, and the country’s credit activities were swiftly restored during the second half of 2020. The electoral uncertainty of 2021 did not significantly affect the reforms that were required for entering the euro zone and for improving the compliance of Bulgaria institutions with the standards of the international financial infrastructure. The governments continued to work on the Plan to Adopt the Euro by 1 January 2024.

Most members of Bulgaria’s 2021 parliament prioritized improving the rule of law. Parliament is planning to elect new members of the Supreme Judicial Council, strengthen the judiciary’s independence, and dismantle the various judicial bodies that are under the control of (or have been created by) the prosecutor general, who acts without accountability. Parliament is currently drafting constitutional amendments to resolve the matter.

Preliminary census data from 2021 (announced on 7 January 2022) shows that Bulgaria’s population has decreased by 11.5% since the 2011 census, and the average family size has shrunk from 2.4 to 2.3 members.

In terms of international cooperation, Bulgaria’s traditional political establishment has forced political newcomers to confirm Bulgaria’s veto on EU accession negotiations regarding North Macedonia (and thus Albania).