This site presents an analysis of the Bulgarian government's economic policies compared to a list of 35 economic policies as prepared by student Dimitri Zlatev with the Mike P. McKeever Institute of Economic Policy Analysis (MIEPA). This study was written in December of 2019. To read the analyses scroll through this site. To learn more about the background policies, click here
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Return to MIEPA's Home PageThe study by Specialist Dimitri Zlatev is presented immediately below.
This study presents a detailed study of the economic policies of Bulgaria, as written by Specialist Dimitri Zlatev. The ratings herein are based on the following rating scale:
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2019. Used herein with permission]
RATING SUMMARY - DIMITRI ZLATEV POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE 1 5.0 15.0 15.0 100 % 2 4.5 13.5 15.0 90 3 1.0 3.0 15.0 20 4 3.0 9.0 15.0 60 5 5.0 15.0 15.0 100 6 4.5 13.5 15.0 90 7 4.0 12.0 15.0 80 8 2.5 7.5 15.0 50 9 2.0 6.0 15.0 40 10 5.0 15.0 15.0 100 11 2.5 7.5 15.0 50 12 1.5 3.0 10.0 30 13 5.0 10.0 10.0 100 14 3.0 6.0 10.0 60 15 5.0 10.0 10.0 100 16 3.0 6.0 10.0 60 17 1.0 2.0 10.0 20 18 2.5 5.0 10.0 50 19 2.0 4.0 10.0 40 20 2.0 4.0 10.0 40 21 2.5 5.0 10.0 50 22 4.5 9.0 10.0 90 23 5.0 10.0 10.0 100 24 4.5 9.0 10.0 90 25 3.0 6.0 10.0 60 26 1.5 3.0 10.0 30 27 1.0 2.0 10.0 20 28 4.5 9.0 10.0 90 29 2.0 2.0 5.0 40 30 2.0 2.0 5.0 40 31 4.5 4.5 5.0 90 32 3.0 3.0 5.0 60 33 4.0 4.0 5.0 80 34 5.0 5.0 5.0 100 35 2.5 2.5 5.0 50 TOTAL 113.5 240.5 370.0 65.0% ===== ====== ===== =====
INDIVIDUAL POLICIES - DIMITRI ZLATEV
1. Freedom from internal control - 5.0
Unlike during the socialist era, modern Bulgaria has unfettered movement of goods and people within its borders. Individuals may, if they please, pack their bags and move to any other spot in the country without having to first request permission from the government. In 2017, parliament passed a law which limited the mobility of those seeking asylum in the country but in practice this applies to almost no one.
2. Freedom of speech - 4.5
The Bulgarian constitution guarantees the right of free speech to all who reside within its borders. Individuals may, by and large, speak their mind without fear of repercussion from the government, however in recent years Bulgaria has slid down the Press Freedom Index. A recent and growing tendency for politicians and their parties to smear journalists and media organizations as manufactures of falsehoods has hampered the flow of information.
3. Effective, fair police force - 1.0
Corruption within Bulgarian law enforcement is widespread, and instances of abuse prosecution are few and far between. Businesses do not have confidence that the police will come to protect them, so most companies hire private security instead. Police have been caught co-operating with criminal organizations on multiple occasions and a 2017 survey showed that roughly 20% of Bulgarians have had to pay bribes to police at some point in their life.
4. Private property - 3.0
Private property rights in Bulgaria are respected more often than not, though the current situation could be much improved. The Heritage Foundation's assessment of private property rights and protections by nation gives Bulgaria a score of 63 out of an ideal 100, placing it between Romania and Turkey. Physical property can, by and large, be safely bought and invested in, but connections between crime syndicates and the police and judicial system impedes the confidence of investors to do so. Bulgaria also has strong de jure intellectual property laws, though in practice actually enforcing them is difficult and often ineffective, meaning the average shop is rife with imitation brands.
5. Commercial banks - 5.0
Bulgaria has a healthy banking market, as some 30 companies, foreign and domestic, compete for the savings of Bulgarians. Over the past decade, banks have cleared their portfolios of non-performing loans (loans where the debtor has stopped or delayed paying back interest) and as a result profitability has soared and most run a very low risk of going under. A very slim percentage of this growth has come from lending to companies specializing in finance, rather most of it has come from investments in small and medium-sized businesses.
6. Communication systems - 4.5
Like most other European nations, Bulgaria is relatively well connected to the outside world. 88% of households have at least one mobile phone. 98% of homes have a television. Most citizens have easy and affordable access to a variety of both nation-wide and local newspapers. While only 58% of citizens have home access to the internet, those who do have it enjoy the 22nd fastest internet in the world, a far cry from neighboring Romania, who ranks in the top 10, but still above Germany, who ranks 25th globally.
7. Transportation - 4.0
Both domestic and foreign goods are able to reach a majority of Bulgarians. Its access to the sea means that it can both sell and buy goods on the international market in a cost effective manner. Its freight and passenger train system is linked to those of neighboring countries, meaning goods and people can be easily moved. Within the country it is possible, though not pleasant, to take one train to a local hub and then take another train to and from one of the larger cities, meaning that rural citizens are not cut-off from the rest of the country. The nation is serviced by five airports who, due to the county’s small geographic size, specialize in international flights. Paved roads connect every village in the country, though the quality of the roads often ranges from poor to extremely poor, especially in non-urban regions.
8. Education - 2.5
Bulgaria has improved its education system in recent years but it still leaves much to be desired. Schooling is compulsory for all children between the ages of 7 and 16 but in 2017 an estimated 12.7% of all high school students dropped out. In rural areas this figure can be anywhere from 15-30%. Many schools suffer from high teacher-to-student ratios and classrooms among other school facilities suffer from mild physical decay. Less than one half of high school students reach the OECD reading and math standards. Fewer than 20% of all Bulgarian adults have a college degree, and most of those who do often leave the country soon after graduation in search of better employment abroad.
9. Social Mobility - 2.0
In the post-socialist era there has been a growing trend where Bulgaria’s wealthy and well connected tend to stay that way and the poor and middle class also remain that way. Children of top earners go to well-funded public and private schools while schools outside major cities struggle to buy supplies and attract educational talent, further lowering the possibility of lower classes attaining the skills necessary to boost their incomes. After the 2008 recession, many rural schools were closed due to lack of funds, leaving many without easy access to affordable, quality schooling. Public works contracts are often given to companies with close ties to politicians rather than companies who can deliver the best product for the lowest cost, meaning most public works are poorly designed and often fall apart in under a decade.
10. Share of All Jobs in Small Businesses - 5.0
Small-to-Medium size enterprizes make up a whopping 75.4% of all employment, well above the EU average of 66.4%. 65.2% of all value added is done by companies that have under 100 employees, again well above the EU average 56.8%. This affinity towards small business can be explained in part by cultural attitudes that promote shopping at small, neighborhood shops over larger competitors.
Source: 2018 European Commision SBA Report on Bulgaria
11. Freedom from outside control - 2.5
As part of the European Union, Bulgaria must comply with certain rules and regulations. Bulgaria must comply with EU law, which dictates that all states must adhere to a baseline of environmental standards, consumer safety standards, and labor safety regulations. The European Union requires that each state implement a value-added tax, though the exact rate is determined by the government of each country rather than by European Parliament. If European law conflicts with Bulgarian law, then European law supersedes it. On the whole the EU delegates a great deal of legislative power to national governments, and normally intervenes only when national governments either refuses to or is unable to deal with an issue.
12. Protection of Domestic Enterprises - 1.5
Bulgaria does not have the power to set its own trade policy. As part of the European Single Market it is forbidden from establishing tariffs or quotas against fellow EU member states and trade negotiations with non-EU nations are done through the EU Trade Commission rather than on its own. Any and all external tariffs must first be approved by representatives of the 28 states. Bulgaria currently runs a trade surplus of ~4.5% of GDP.
13. Foreign currency transactions - 5.0
All transactions in the country, whether it be construction deals, grocery sales, or the issuing of government bonds, are all denominated in lev. All foreign currencies must be first converted to the local currency in order to conduct business.
14. Border control - 3.0
Bulgaria is one of the few nations in the EU not in the Schengen Zone, meaning that all goods and people must be checked before they are allowed to enter the country, though it is legally obligated to one day join. Any person who wishes to travel from a neighboring state to Bulgaria or vice versa must present a valid visa or be rejected. In response to both the 2015 migrant crisis and an uptick in drug trafficking between the two states, Bulgaria has spent money on border patrol agents and new fences along its border with Turkey. Despite its best efforts, organizations specializing in people smuggling continue to operate, though more resources are being invested to combat this.
15. Currency - 5.0
Within Bulgaria the lev reigns supreme. Any attempt to purchase goods and services with any non-lev currency, even when in shops near borders and areas catering to foreign nationals, will be met with rejection and contempt.
16. Cultural, language homogeneity - 3.0
There is an ever present ethnic animosity between the major groups of Bulgaria but thankfully violence has never arisen from this hostility in the past century. As a result of Turkification policies between the 14th and late 19th centuries, which often included migration of Turks from Anatolia as well as forced deportations of native inhabitants, modern Bulgaria has a minority Turkish population of ~8% of the total. It also has a smaller number of Roma, who comprise anywhere from 4-11% of the population. 76.9% of Bulgarian citizens are ethnic Bulgarians, and 76.8% speak Bulgarian as their mother tongue. A noticeable percentage of ethnic Bulgarians consider Bulgarian Turks remnants of an oppressive past and resent their presence in the country, though this remains a minority view.
17. Political effectiveness - 1.0
Political corruption in the country is widespread, and this hinders the government’s ability to effectively execute its duties. According to the World Bank, Bulgaria's government effectiveness is on par with Rwanda’s and slightly worse than St. Vincent and the Grenadines. Little of the money invested in the country by the EU has made its way out of Sofia and Plovdiv, the largest cities, often being spent on pet projects that wither and foreclose once EU funds cease their flow. Of the 28 EU states, Bulgaria ranks 26th in government effectiveness, 27th in its ability to control corruption, 26th in government accountability, and 28th in rule of law.
18. Institutional stability - 2.5
Trust in institutions in Bulgaria is low. In 2015 the Supreme Judicial Council was involved in a scandal where it was discovered that the heads Sofia City Court were distributing cases involving political corruption to judges who were already overburdened in hopes that such cases could be delayed for several years. Political parties come and go, and are often aggressively populist in nature. The NDSV party, a populist center-right party lead by Bulgaria’s former king, once won an outright majority in parliament only to disappear within two election cycles. In 2013 the ruling in parliamentary coalition could not sustained so a snap election was held the following year. The current government is led by the center-right, pro-EU GERB working in coalition with a collection of small far-right, eurosceptic, pro-Russia parties.
19. Honest government - 2.0
Tackling corruption has been a campaign promise since the introduction of free elections, and while some progress has been made in the past 28 years, there is still a long way to go if Bulgaria hopes to ever rid its government of dishonest dealings. Transparency International, which measures public perception of corruption, ranks it 77th out of 180 countries, and 28th out of 28 in the EU. In 2003 it scored 61/100, where 100 is considered totally corruption-free. In 2011 it reached an all time high of 67/100 before slumping down to its current 58/100. Corruption impacts everyone from the Supreme Judicial Council to local politics; in 2014 a bar owner was caught promising payouts of $40-55 per person to residents in a poor neighborhood if his preferred candidate for city council won.
20. Common laws - 2.0
Poor and middle class citizens most often receive fair trials, but those with the means to pay off judges in exchange for lenient sentencing or not guilty verdicts often do so without sizable risk of repercussion. Judges in Bulgaria are the lowest paid in the EU, earning on average $20,500 per year, making bribes more worth the risk of being caught. Corruption in the justice system renders it less trustworthy and less effective than it otherwise would be. Many courts outside major cities suffer from a pervasive lack of assistants in courthouses, leaving judges with an enormous backlog of cases.
21. Central bank - 2.5
For most of its history, the Bulgarian National Bank adhered to the will of the monarch, and later the central committee, often being forced to lend to the government even when it did not deem it appropriate. For a brief period, with its sole ownership of the printing presses and being freed from government control, the bank had total control cover the country’s currency. This did not last. Following a period of hyperinflation where prices at one point rose 242% each month, the lev was pegged to the German Mark for stability, and was later pegged to the Euro. Bulgaria is legally obligated to one day join the Eurozone, giving the central bank’s power to the European Central Bank, though the exact date of this ascension is yet to be determined
22. Domestic budget management - 4.5
Like most governments, Bulgaria’s total spending exceeds its total revenue, but not by much. In 2016 the country ran a deficit of a microscopic 0.1% of GDP. More recently the nation splurged on a fleet of new fighter jets, running the country into a deficit of 2% of GDP, but over the past decade the annual deficit has run an average of 1% to 1.8% of GDP. The country’s 10% flat income tax rate means that extra revenue can easily be raised if the deficit grows too large. Bulgaria’s current credit rating of BBB- prevents it from acquiring large amounts of credit, which prevents it from spending more than it otherwise would like.
23. Government debt - 5.0
Unlike its neighbor to the south, Greece, who struggles to pay off debt nearly twice the size of its entire economy, Bulgaria has a debt of just 23.9% of GDP, placing it 182nd out of 210 countries when it comes to public debt according to the CIA. This is a substantial climb down from 1991, when the country owed equivalent to 180% of GDP. This feat was accomplished in part by selling off almost all state owned industry during the transition to a market economy. The external public debt servicing as of 2016 cost ~$508 million, or just 0.89% of GDP.
24. Economic statistics - 4.5
The National Statistical Institute of Bulgaria is the primary producer of health and economic statistics for both the Bulgarian government and the European Union, and its assessments of the country are generally trusted. The authority is largely independent from other government ministries so interference is low, though the EU has disputed the quality of its data collecting methods on several occasions. Economic data about Bulgaria collected by the NSI and NGOs such as the IMF are considered largely accurate and trustworthy.
25. Protection of public health and safety - 3.0
As of 2015, Bulgaria had the third highest mortality rate on the European continent, at 708 deaths per 100,000 people each year. According to The World Bank, Bulgaria has a tuberculosis incidence rate of 25 people per 100,000, putting it on par with Guatemala. It estimates that of these 25, ~3.5 will die from the disease. After climbing briefly in the early 1990’s, Bulgaria’s under-five mortality rate shrank from a high of 19.5 per 100,000 to the current 7.5 per 100,000, or roughly the same as Qatar.
26) High wage policies - 1.5
The gross income of the average Bulgarian is pitiful when compared to other developed nations, standing at a mere $707 per month. After taxes are paid, the average Bulgarian worker takes home just $6,600 annually, though when accounting for purchasing power parity this is more akin to $19,800, as the country has a remarkably low cost of living. The minimum wage is currently $316 per month, or ~$948 after adjusting for PPP. Bulgaria has the highest percentage of people at risk of poverty in the whole EU at a whopping 41.6% of the total population in addition to the 23.4% who already live below the poverty line.
27) Environmental protection - 1.0
Much of Bulgaria lacks even the most basic environmental regulations and protections despite 12 years of EU membership and billions of Euros in investment. Nearly three-fourths of all urban waste water continues to flow into lakes, streams, and the Black Sea. A meager 6.7% of waste water undergoes stringent treatment. It continues to have one of the highest rates of death due to air-pollutants, which caused an estimated 15,200 premature deaths in 2015 alone. While the socialist government of decades past put a great deal of emphasis of natural conservation, following governments have not. Bulgaria has yet to fulfill its goal of setting aside areas for preservation despite being legally obligated to do so by the EU.
Sources: https://ec.europa.eu/environment/eir/pdf/factsheet_bg_en.pdf https://www.unece.org/fileadmin/DAM/env/epr/epr_studies/Synopsis/ECE_CEP_181_Bulgaria_Synopsis.pdf
28) Strong army - 4.5
Bulgaria is currently protected by NATO, so its need for a standing army is comparably low compared to nations of a similar size. While it has been ramping up its military spending in recent years, its current 1.69% of GDP on military expenditures falls short of the 2% required by NATO. Its total land, sea, and air forces stand at just 31,300 personnel.
29) Foreign trade impact - 2.0
The economy of Bulgaria is highly reliant on trade with the outside world. Despite only having a GDP of $58.2 billion, it imports $68.2 billion worth of goods and exports $60.3 billion. The nation has a trade-to-GDP ratio of 131.1%, placing it within the ballpark of countries of similar population and wealth.
30) Management of foreign currency budget - 2.0
As mentioned previously, Bulgaria’s well being depends greatly on being able to purchase goods and services from abroad, due in no small part to its socialist-era industry being unable to keep up with more modern foreign competitors and its small population, which has shrunk by 21% from its height in 1989. As of 2017, Bulgaria runs trade deficit of $7.9 billion, or 13.5% of GDP.
31) Layers of collective action - 4.5
While Sofia maintains a strong influence over the nation, Bulgaria devolves a great deal of power to local governments. The country is divided into 28 provinces, which are further subdivided into smaller municipalities, which each contain either one town or several small villages. In municipalities where the population exceeds 150, mayors are elected to serve four-year terms alongside municipal councils. If the population is less than 150, then they are instead governed by an appointed mayoral manager.
32) Pro-Business climate - 3.0
As of 2019 Bulgaria ranks 59th on The World Bank’s Ease of Doing Business Index, placing it squarely between Croatia and Morocco. Starting a business is arduous, entrepreneurs must first endure 23 days of legal hoop jumping before they may even hire their first employee. The corporate tax system is needlessly complex; a company must devote 453 man hours a year to prepare, file, and pay taxes, compared to just 214 hours for other European nations.
33) Government enterprises - 4.0
While it has since sold off a majority of what was once state-owned during the Socialist era, the Bulgarian government does own, either in total or in part, several companies. These include companies involved in electricity and gas distribution, postal services, and the country’s rail system. While the government has been weaning these companies off subsidies for several years, the government recently borrowed money to pay off debts incurred by its energy sector.
34) International security agreements - 5.0
Following the 1991 collapse of the Warsaw Pact, Bulgaria was temporarily left to its own devices, militarily speaking. This period remained brief, as by 1999 Bulgaria was welcomed into NATO, which remains its sole defense treaty. Should Bulgaria be attacked, 28 nations with a combined military spending equal to 70% of the world’s total is legally obligated to assist it.
35) Protection of Domestic Enterprises from Government Mandated Costs - 2.5
As part of the European Union Customs Union, Bulgaria lacks the power to establish tariffs. Its trade policy is instead determined by the European Commission; any new tariff must be approved by a simple majority of EU member states and cannot in any case be levied against fellow members.
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