Bulgaria’s economy has marked a growth rate of almost 2 percent since the beginning of 2015. This is due most of all to domestic consumption, said for Radio Bulgaria Desislava Nikolova, senior economist at the Institute for Market Economics. Another factor is the accelerated rate of payment under European projects. Another positive trend is connected with the recovery of the labour market since the beginning of the year, a tendency that has continued, spelling good news for the economy, for incomes and for consumption, says Desislava Nikolova:

“The recovery of the market of labour is one of the reasons why consumption has gone up, as people now have more cash. Another factor that boosts consumption is deflation, a tendency that was interrupted briefly at the beginning of 2015, though negative inflation has been a fact in the country in past months. On the whole it can be said that the Bulgarian economy has been faring relatively well, compared to other economies in Europe. Economic growth rates of 5-6 percent would be a good thing, rates that were in place before the crisis, though at this time, the economic situation and the limited outside demand preclude such growth rate percentages. Domestic problems also put a spoke in the wheels. During the pre-crisis period Bulgaria had a robust inflow of investments; now they are no longer a significant factor for the local economy. This vacuum was filled by European funding at accelerated rates of payment under projects from the previous programming period in 2013, 2014 and the beginning of 2015.”

Desislava Nikolova says that one of the concerns regarding European funds is that, as of the beginning of 2016, the rates of European fund absorption will slow down, as, at this juncture, not all operational programmes have been approved whereas payments under the new programmes have not begun or are still negligible.

“It should be noted that there are several sectors of Bulgaria’s economy in which the growth rate has been considerable in recent years, most of them in the service area. The growth rate is highest in the IT industry, which is the most important factor on the labour market. Another sector with a significant growth rate is the outsourcing of various business services, because labour expenses are lower while the workforce in this country is highly qualified. Jobs are being created in several sectors. One of them is auto parts manufacturing. Bulgaria is on its way to becoming a regional centre in this sector and, after the crisis, a large portion of the foreign investments have been flowing into this subsector.”

Could the constant increase of the minimum wage have an adverse effect on the labour market?

“Such apprehensions have existed for quite some time. We have been expecting such an effect ever since the minimum wage started its steep ascent. We recently released a survey which clearly shows the negative effect the increase of the minimum wage is having on employment, especially with the most vulnerable group of low-skilled workers – people with primary or lower education level. That is where the biggest problems lie. I made mention of several sectors which have been creating many job openings, but they are sectors that offer jobs to highly skilled workers. At this time the labour market is not offering jobs to workers with poor education, unlike the period before the crisis.”

According to Deislava Nikolova, low skilled workers should receive support by way of a broader reaching social policy, and not by raising the minimum wage.

Bulgarian exports are an essential motor of the economy. Are they likely to be affected adversely by China’s slackening development?

“Being a small open economy, Bulgaria is highly dependent on its export. During the pre-crisis period, export was the prime motor of growth. What we are seeing now is a heightened risk of a slowdown in exports that is the result of the lower growth rates of the Chinese economy. In recent years, China has been a major importer of Bulgarian commodities, mostly raw materials. But the secondary effect of the slowdown of the Chinese economy on Bulgarian exports with regard to this country’s exports to Europe’s economy, is not to be underestimated. The other EU countries also have sizeable exports to the Chinese market, especially Germany which is among Bulgaria’s biggest trade partners. The effect would be the same were the Chinese economy to slow down substantially. At this time this is the biggest international risk to the Bulgarian economy.”

English version: Milena Daynova