COUNTRY OUTLINES: GENERAL ECONOMIC SITUATION OF THE REPUBLIC OF BULGARIA


Bulgaria, following the serious financial crisis occurred in 1997, opened itself to foreign investments even in the strategic sectors of the national economy, and in recent years it has as well pursued policies aimed at further attracting FDIs. 
Having become a member of the European Union from January 2007, the Country is clearly an attractive market for the delocalization of production thanks to the still low cost of skilled labor and low costs of energy, as well as for the fact of benefiting from a competitive fiscal policy for companies operating herein.
From the 1st of January 2007 the tax level on firms has been decreased to 10% - the lowest figure in the whole of the EU. From the first of January 2008 a flat tax has been introduced for all physical economic subjects at the same level (10%); furthermore the pension quota has been reduced by 3%.
Official forecasts about maroeconomic results in 2007 confirm the positive trend of the economy, even though the difficulties that have already emerged in 2006 have become more evident. The GDP growth remains strong at an average level of 6% per year, a figure significantly higher than the average european growth rate.
As far as the current accounts deficit is concerned (caused mainly by the high level of the debt in the private sector), the figure at the end of 2007 is decreasing by 8% (Bulgarian National Bank data). The macroeconomic indicators remain positive, since the current accounts deficit – mostly due to the negative commercial balance – is strongly limited by the amount of FDIs, that have almost reached 6 billion Euros in 2007. 
The trade balance remains negative for Bulgariam, however trade between Bulgaria and the rest of the World (including the intra-european trade) is rapidly growing, with a significant increase in the Country’s exports. 
Another figure kept under strict observation is the inflation, that has reached the level of 12.5% by the end of 2007. The increase in bulgarian inflation finds its roots not only in the extreme dinamicity of the bulgarian economy, but also in the sharp increase of the weight of utilities and real estate in the bulgarian economic structure.
The negative trend of inflation cannot however outcast the fact that Bulgaria is virtous in respect to all other economic Maastricht Parameters. A particular dinamic reality is represented by the bulgarian capital market, as testimonied by the interest shown by the Italian stock exchange when it has come to know that 44% of the bulgarian stock exchange was to be sold. Confidence in the bulgarian economy has been shown by the major world rating agencies. These have been confirmed at the beginning of 2008. Significant  results can also be seen in the struggle against unemployment, figure fallen to 6.6% in 2007 (the lack of local workforce in circumscribed industrial areas is forcing the bulgarian government to incroduce a regime of incentives in order to favour the come-back of bulgarian workers from abroad, as well as simplify the access of immigrant workers in Bulgaria).
In 2008, growth is foreseen to be constant. Bulgaria is an energy-producing Country, it witnesses high growth in the service sector (which represents an increasing share of the GDP, firstly thanks to the banking sector, the financial intermediation and tourism), nonetheless it maintains considerable industrial production levels. Given these elements it is expected that there will be great evolution in the sector of infrastructures, mainly for transport, environment and energy (please see specific section of the Website).  

BILATERAL ECONOMIC RELATIONS  

Economic relations between Italy and Bulgaria are excellent. Italy is amongst the main Countries as far as Foreign Direct Investments are concerned. The figure in December 2007 is 1005 million US$ (Bulgarian Government Agency for Investments) although statistically the figures can increase if FDI by Italian-owned foreign companies are taken into consideration (in this case the figure would be closer to 1755 million dollars for the investments by Ciments Français – officially Italian-controlled by Italcementi, but considered French – as well as the investment of Enel in the thermoelettric power-plant Maritza East III).  
Our presence in the Country is therefore characterized by investments from large and consolidated holdings and Companies belonging to strategic sectors of the economy. Apart from the above-mentioned firms, it is necessary to mention the presence of Miroglio Tessile (active with six factories in the Country, the last of which has been installed in August 2007, for a total investment of 250 million Euros), Unicredit Group (through its controlled Bulbank – the most important banking Company in the Country controlling 25% of the market – that has been merged with HVB and Bankaustria and its relative local branches after an investment of 300 million Euros to become the most important Bank in Bulgaria), AMGA-Udine, ACEGAS-APS-Trieste and Gas Rimini (three general services Companies, the last of which also holds three regional concessions for the distribution of gas and total investments for around 400 million Euros), the SIAD Group (four compressed gas production factories), Petrolvilla Trentino-Energia (construction of nine hydroelettric power-plants) – and this is to cite only the main Companies, aside of which many other Small and Medium Enterprises (SMEs) have successfully penetrated the Bulgarian market making the best use of the diverse and dynamic opportunities offered by Bulgaria (especially with regard to the farming, industrial production and the fairs of Plovdiv). According to the forecasts of the Italian Trade Commission (ICE), the Italian Companies in Bulgaria are around a 1000 by number. Mixed italo-bulgarian Companies in the territory are around 2500. Recently also the Generali Insurance Company has arrived in Bulgaria conquering important market shares already in its first year of activity. In September 2007 the official announcement that Astaldi group has won an important contract for 160 million Euros for the modernisation and electrification of the railway Plovdiv-Svilengrad, on the Turkish border. The possibilities of investing and expanding Italian economic interests in Bulgaria remain constructive – as already pointed out – and are further upheld by the potential use offered by the substantial European structural funds that this Country will receive in the next years, as well as from the possibilities that arise from the expansion of the market. Following from Alenia’s victory of an important bid in 2006, particular Italian interests should withstand also in the defence sector – the Bulgarian forces are in a phase of complete modernisation to conform to the NATO standards.  

Also in terms of trade the trend in the last few years confirms a privileged position in the market share, position further enhanced by the trade balance equilibrium, as well as compared to main competitors of Italy in import-exports such as Germany. Data at the end-of-year 2007, show that the trade (imp-exp) between the two countries was worth about three billion euros, and confirm this positive trend. The increase in Italian exports in the country however has been of 4,4% instead of 22% of the previous year. In Bulgaria, Italian export finds an important market for sectors that traditionally characterize Italian exports such as mechanics (high-tech machinery), textile industry, cars, footwear, leather produce, woods, ICT products, electro-technical, and high-precision work tools.  

The market penetration of our Country appears to be solid and steady, undoubtedly destined to further growth, surely made possible by the enlargement of the market, the modernization of the industry and the growth of Bulgaria’s buying power. Besides, Italy is favoured by a positive overall image mainly for the cultural background that links together the two Countries.
In this context, the activity that the Italian Embassy carries on to support our enterprises is enriched by the availability of the Merged Services Office – that is located within the Embassy’s building – that apart from the Economic-Commercial Office of the Embassy, encompasses the Italian Trade Commission, the Consultive Committee of Italian Entrepreneurs in Bulgaria, the desk of the Emilia-Romagna Region, the Foreign Centre of the Joint Piemonte Chambers of Commerce and the desk of the Lombardia Region. These actors – together with the Italian Chamber of Commerce in Bulgaria (fully recognized by the Italian Ministry of International Trade), regional associations and continuous cooperation programmes supported by central government as well as local institutions – offer a complete assistance to Italian entrepreneurship that is further interested in the Bulgarian market as time goes by. For this reason there is a variety of category associations, chambers of commerce and regional economic missions, as well as single entrepreneurs, that are beginning to understand the potential of Bulgaria and will certainly contribute to increase our economic presence in the Country.