Population: 8.1 million Population per sq. km: 71.5 Population growth: -0.6% Life expectancy: 72 years Population below national poverty line: 12.8% GDP per capita(current US$): 1,669 GDP(current US$): 13,553 million GDP Growth: 4% Sources: National Statistical Offices, IMF, IFS, WDI 2002 and Staff estimates.
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PDF version Text Only Version Overview Bulgaria has made significant progress in its transition to a democratic society and functioning market economy, following a difficult start.
Since 1997, Bulgaria’s policy framework is centered on the Currency Board Arrangement and supported by a tight fiscal policy, strict incomes policy, and a broad agenda of structural reforms. Strong support by all political parties for Bulgaria’s EU accession and NATO membership is effectively anchoring the direction of macroeconomic policies and structural reforms.
Important progress toward long-term macroeconomic stability has been achieved. Real GDP growth averaged about 4 percent per year in 1998-2001 and inflation has been contained to single digit levels. Poverty has declined by nearly two-thirds since 1997 to 12.8 percent in 2001, but remains more than double the pre-crisis level. Yet, unemployment remains high.
There have been major structural changes in the economy. The first generation of structural reforms have been implemented, with the private sector share of GDP reaching 63 percent and the share of private sector banks in the banking system increasing to 80 percent at end-2001.
The reform program of the government builds on the gains of the past five years and makes a strategic shift in emphasis towards promoting growth and reducing poverty. The government has embarked on a strategy of creating an investment climate that encourages private investment and ensures that these investments are translated into increased productivity and growth.
In the social sector, reforms are moving to a new phase with emphasis on developing human capital to complement investment in physical capital. At the same time, they address new challenges faced by social protection programs in the form of continuing high long-term unemployment, and the changing nature of poverty. Focus of World Bank Assistance Since Bulgaria joined the World Bank in 1990, Bank assistance to the country has aimed at fostering sustainable economic growth. Assistance has focused on accelerating structural reform and the rapid development of the private sector, while addressing poverty through improvements to the social safety net and other social sector programs. The World Bank Group’s overarching objectives for the next three years are to reduce poverty, raise living standards, and support Bulgaria’s efforts towards EU accession through: Stimulating private investment and productivity growth, by strengthening the business environment through regulatory and judicial reform, measures to facilitate exit and entry of private firms, completing the privatization process, restructuring the main infrastructure sectors (energy, railways, telecommunications, water), increasing flexibility of labor markets, deepening the financial markets, and continued reform in agriculture; Sharpening the focus on reducing poverty and unemployment, by investing in human capital, strengthening social programs, and improving targeting of social assistance; Improving governance and social service delivery, through aggressive implementation of anti-corruption measures, reform of public administration, and strengthening of local governments. For further details please see the World Bank's Country Assistance Strategy for Bulgaria for 2003-2005. Impact on the Ground Private sector led growth contributed to a reduction in poverty. Structural reforms to support the macroeconomic stabilization program were completed. As a result of a Bank-supported Financial and Enterprise Sector Adjustment Loan (FESAL), the private sector share of the economy grew from 53 percent in 1996 to 63 percent in 2001. Some 85 percent of bank assets have been privatized leading to a well-capitalized, well-supervised and profitable banking sector. One hundred percent of the insurance sector has also been privatized. Annual FDI flows averaged at US$760 million over 1998-2001, compared to less than US$100 million before 1997. The overall private sector led growth contributed to a reduction in the poverty rate by two-thirds in the period 1997-2001. Access to quality health care improved. Over 2,500,000 people living in rural and remote areas (some 1/3 of the total population) now have access to quality primary health care as a result of health sector reforms supported by a US$ 26 million loan for health sector restructuring. Investments made in Emergency Medical Services have resulted in a threefold reduction in mortality rates among emergency cases. The countrywide Blood Transfusion Network was modernized with World Bank funding. In its five regional centers, the Network produces clean and safe blood for Bulgaria’s hospitals and high-quality blood products for all medical purposes. Jobs were created and the standard of living of the poor and vulnerable raised. Under a US$5 million Regional Investment Fund, 65 small community infrastructure projects to raise the standard of living of the poor and vulnerable have been completed. The project’s success has attracted additional funding from the government and other donors for another 255 projects throughout Bulgaria. The quality of all levels of education is being improved. The overall resource management and quality of teaching and learning in primary and secondary educational institutions is being improved as a result of US$ 14.4 million loan. The project also helps improvements in the quality of higher education along with greater equity, while continuing to maintain the already high levels of access. The welfare of children from poor families improved and children’s rights were protected. Some 1,335 children from poor, ethnic-minority families were brought back to school in the current school year. Child welfare improved and children’s rights were protected through community-based approaches that are cost-effective alternatives to institutionalized childcare. In addition, 28 experts on ethnic issues were trained in project management and in interacting with ethnic minority communities. The project supports the establishment of some 25 Community Support Centers, Mother and Baby Units and Street Children Shelters. Environmental hazards caused by old pollution were reduced. Immediate environmental hazards from the MDK Copper Smelter were cleaned up and past environmental damage remedied, reducing health risks and improving the environmental performance of the enterprise. As part of the project, jobs have been created for local people. A model for addressing past environmental damages, and environmental liabilities incurred in the process of privatization has also been established. The project has been scaled up to a US$50 million Environment and Privatization Support Adjustment Loan (EPSAL) that supports the Government in environmental activities throughout the county. For details of World Bank projects in Bulgaria please click here. Challenges Ahead ž Despite improvements since 1997, poverty remains at twice the levels of 1995. Pockets of poverty persist among certain groups, particularly the unemployed, ethnic minorities (mainly the Roma), and large households with small children. ž Registered unemployment has been rising steadily since 1996 and, at 17.5 percent in 2001, is among the highest in the region. ž The country's external position remains under pressure. Large current account deficits have persisted over the last four years and are likely to continue. A significant inflow of foreign investments is needed to finance the current account deficit and sustain an adequate level of reserves to maintain confidence in the Currency Board Arrangement.
ž Unfavorable demographic trends and the need to mitigate the impact of restructuring call for decisive steps in the implementation of reforms in education, health, and social protection.
ž Weak governance is limiting investment and constraining the business climate. Governance needs to be improved through aggressive implementation of anti-corruption measures, reform of public administration and strengthening of local government.
World Bank Partners in Bulgaria