WHY DOES BULGARIA LAG BEHIND IN GLOBAL COMPETITIVENESS RANKINGS?

The reasons for Bulgaria's lagging behind in the competitiveness rankings are many. They are complex and in different directions. The only positive is that the corporate sector has slightly improved its efficiency and the country is moving one position ahead in the rankings. Business is improving its efficiency, but what is dragging Bulgaria back is bad public policy. This is what Shteryo Nozharov, economic adviser at BIA and a lecturer at the UNWE, said in an interview for Bloomberg TV Bulgaria.

The Bulgarian economy is going lower and lower in the ranking of competitive countries in the world, according to the 35th edition of the World Competitiveness Yearbook 2023 of the World Competitiveness Center (WCC) at the Swiss Institute for Management Development (IMD).

"Bulgaria has permanently lost its competitiveness over the years. Compared to 2020 we have gone back by 9 places, and compared to 2009 - by 19 places... Our country is losing competitiveness in terms of its economic activity by only one position, but in terms of government activity we are going back by several positions. The business climate and infrastructure are deteriorating strongly," Nozharov said.

There are some other features that put strategic pressure, he added. "First and foremost is the shrinking demographics. Bulgaria is forced to continuously increase wages without this being linked to an increase in labour productivity."

"For the first quarter of this year, according to Eurostat, Bulgaria has the highest rate of compensation for work in the European Union with about 15.7%. This is the highest wage compensation rate in the EU," the guest pointed out. "The average there is 5%. That is, Bulgaria is three times the average. This puts pressure on business. So, in addition to the deterioration of the business climate, we also have this factor."

"The third pressure is from the problems with raw materials and fuels. They have calmed down after the war in Ukraine, but it is not over yet. A number of raw materials and their supplies to Bulgaria include a risk premium for the fact that the war is not yet over. There is uncertainty," the guest pointed out.

The strange policy of our governments in recent years also has an impact, Nozharov clarified. "There was talk of an excess profits tax, there was talk of a price ceiling, a ceiling on surcharges. There is no normal investor who would react positively to such news about some strong tax and fiscal pressure. That also pushed up the business price."

"Separately, Bulgaria has a low level of debt, but also a very rapid increase in this debt. This also scares away investors, even domestic ones, let alone foreign ones. The rapid rate of debt growth also chills the desire to invest, as it means a future increase in the tax and social security burden."