BULGARIA
The Bulgarian economic history since the fall of the Communist regime can be
divided in two main parts, the period between 1989 and 1997, when the country
experienced its biggest crisis, and the time between 1998 and 2008.
Each period has its sub-periods, which are connected as expected with the political
parties and movements in the administration of the government.
The time between 1989 and 1997 was an unstable period in economic terms since
the open economy market was something new for the country and the region and since
the political environment was not established. This can easily be seen in the graphs that
we are going to go through now.
GDP
First we are going to look at the GDP growth in percentage. Here we can easily
say that in the first years of democracy, the government has chosen the right actions to
improve the GDP level and the country as a whole had a fast growing economy. Then we
see an enormous decline, which is caused by the hyper inflation and by the instability of
the government at that time. After the radical political changes in 1997, we see a huge
improvement, followed by a minor decline and than, a period of stability which is a sign
of a good economic policy.
You can also take a look at the GDP graph in terms of dollars.
Sector Development
In the next 5 charts you will see the distribution of GDP share by sectors. Thus the
industrial sector formed around 50% of GDP in 1990 it dropped to around 28% in only 7
years and is not experiencing any serious change since than. The Agricultural sector
remained relatively stable in the first 7 years even though we see a small decline in the
percentage. This is followed by an enormous short run increase, which did not hold in the
long run and since than it is constantly going downward. The service sector, which was
not developed and popular in the beginning of the 90`s and represented only 34% of
GDP, climbed fast to 50% in only 3 years and kept this level for another 3. Than it
experienced a small drop of 5% in 1997 and is constantly but slowly increasing ever
since.
Current Account
Before the fall of the Communist Party the major export destination was Russia but than
other trading partners emerged such as Yugoslavia, Ukraine and many others. The
increase in the amount of exports was mostly caused by the trade agreements that
Bulgaria signed – The European agreement for association and the Temporary agreement
for trade in 1993, the membership in the World Trade Organization in 1996, EFTA and
CEFTA agreements and others. The graph shows a lot of movements up and down
through the years but as a hole the GDP share of exports has increased almost twice in
the period 1990 – 2008.
The import graph is not that different, even though its movement is smoother that the
previous one. The trade deficit has risen through the years, causing a rise in the Current
Account deficit, which reached a level of -21.5% of GDP in 2007. Another cause for the
CA deficit is government lending.
Inflation Rate and Exchange rate
The decline in output in the first years of the transition process was accompanied by a
hyperinflation of more than 200%, just one year after the beginning of the new era. The
inflation kept high levels because of the governments` funding of its budget deficit.
During the second recession in 1997, the inflation hit enormously high level, around
950%. Another component that affected the inflation rate is the exchange rate, which was
not market driven until the late 90`s. In the graph you can see the exchange rate
movement in the period 1998 – 2010. The average in this period is 1.708 lv. per US
dollar.
Budget Deficit and Government Debt
In the beginning of the 90`s Bulgaria was considered as a low indebted country but this
changed entirely in less than a decade. In 1998, the highest point of the government debt,
it was around 3 billion BGN. The major components that caused this are the decline in
output, the costs of reform and restructuring and the political business cycle.
Here you see the graph of the ratio between the gross external debt and GDP in the period
1996 – 2008. It is obvious, that even though there was a decline in the beginning of 21st
century, overall there is no progress in keeping it low.
Unemployment
The unemployment rate is more or less the mirror image of the GDP graph. In the last
years, there is a constant decline in the unemployment rate, which shows once again the
economic development of the country. This tendency would have been kept if it was not
for the financial crisis. The predictions of experts for the first quarter of 2010 are that the
rate is going to reach 20%.
CONCLUSION
The period of revolution has not started well, as it is obvious from the statistical
information given. The first decade was full of drastic changes in all components of the
economy. After 2000 we see stabilization in most of the economic variables but still,
there are factors that did not settle until the country joined the European Union in 2007.
However Bulgaria is facing a lot of concerns today. The country has just found its place
in the EU economy and is facing another recession period. It is expected that in 2010 the
economy will start recovering from the financial crisis, even though it is not going to
reach the levels of 2008.
Sources:
www.cia.gov
www.investbulgaria.com
www.worldbank.com
www.stat.bg
www.sofiaecho.com
www.euroeconom.com