Bulgaria’s economy experienced consistently rapid GDP growth between 2000 and 2008, with growth rates ranging between 7.7% and 5.2%. In 2009 Bulgaria was significantly affected by the global economic crisis when the GDP growth rate dropped to –5.5%. Although economic performance improved in 2010 and growth rates recovered to slightly above 0%, no significant progress has been made in returning the economy to its strong pre-crisis growth levels. The IMF predicts GDP growth for 2013 at 1.5%.
The quick initial recovery and ability to reach low but positive growth numbers was due to the government’s decision to use surplus reserves built up during the prior strong economic growth years. Other basic policy measures such as cuts in government spending have also helped stabilize the economy, but have left the country with high unemployment levels and low domestic demand.
The Centre-right government of Prime Minister Boiko Borisov, which took power in 2009, has introduced a variety of austerity measures and spending reforms to try and combat the high inflation and unemployment rates along with other economic struggles in the EU’s poorest country. Borisov has proposed the institution of a 10% tax on interest from deposits to boost revenue and spending and is awaiting approval from parliament. The government also plans to sell its stakes in the Bulgarian Stock Exchange, a railway company, a weapons manufacturer and several energy companies in order to raise government funds.
In addition to economic struggles, Bulgaria has major problems combating crime and corruption within the state. Many even accuse Bulgaria’s Prime Minister Borisov of corruption and involvement in organized crime, although he ardently denies these allegations. Bulgaria joined the European Union in 2007; however, their entry into the Schengen passport-free zone has been blocked until the nation reduces crime and corruption to a level satisfactory for European standards.
Bulgaria’s democratic performance (as rated by Freedom House) reached its all-time best between 2006 and 2008, when it climbed slightly above the 3.0 threshold into the category of “consolidated democracies”. After the crisis hit, Bulgaria’s democratic performance returned to its pre-2006 ratings, gradually worsening from 3.04 in 2009 to 3.14 in 2012. Currently Bulgaria has fallen back into the category of “semi-consolidated democracies”. This small but steady worsening of democracy scores reflects both pre-existing flaws in the political system, such as the lack of credibility of the government, and negative effects of the global economic crisis on Bulgaria’s democracy.
Despite extremely low public approval ratings, the financial stability and democracy rankings of the Bulgarian government were not completely compromised by the economic crisis. Even though more than two thirds of Bulgarians believe that the economic situation will not improve in the next year, and more than half of citizens rate the economic conditions as “unbearable”, Bulgaria’s economic problems have not caused any serious regression towards an authoritarian rule.
You may share this content as you like provided that you share it in its entirety, attribute it to the Foreign Policy Research Institute, and include our web address (www.fpri.org). If you receive this as a forward and would like to be placed directly on our mailing lists, send email to FPRI@fpri.org. Include your name, address, and affiliation. For further information, contact PDT at 215-732-3775×232