On a new path
Most Bulgarians have always considered themselves Europeans even before the country joined the EU. It is not surprising that, according to the results of surveys, almost 80% of the population approved of Bulgaria's new status and hope for changes for the better. More than half of the respondents consider the possibility of visa-free travel to other countries for travel and work to be an important advantage. The opportunity has opened up for Bulgarian youth to study at European universities on preferential terms or even for free.
At the same time, if you ask what has changed in the life of a Bulgarian since the country joined the EU, you will probably get the answer: "Everything has gone up in price, but salaries have remained the same." 54% of respondents consider price increases to be negative aspects related to EU membership, and 37% consider the departure of qualified specialists from the country.
Well, complaining about a hard life is part of the national character. It can be seen with the naked eye that over the past year, Bulgarian citizens have generally begun to live better – despite their own opinions. This can be indirectly judged by the fact that Bulgarians began to massively replace old household appliances with modern models, increasingly acquiring more expensive and high-quality goods. Especially eloquent is the fact that in 2007 new cars were sold in the country by 25% more than in 2006, despite high gasoline prices. It is also important that the new round of rising real estate prices has made Bulgarians who own housing potentially wealthier people.
At the same time, inflation in 2007 really turned out to be very high – about 13% per year, but the reasons for this state of affairs are not so much related to joining the EU as to the pan-European trend of rising prices for energy, grain and a number of other products. Inflation is expected to reach about 7% next year.
Positive developments
The final statistics for 2007 have not yet been summarized, but it is safe to say that last year turned out to be a transitional year for the Bulgarian economy. Only in 2008 will the country begin to receive subsidies from EU funds, which should be directed to the development of certain sectors of the economy and infrastructure, their total amount by 2013 will amount to 11 billion euros. But even without these financial injections, according to preliminary data, the growth of the Bulgarian economy in 2007 exceeded 6.6%, despite some skeptical forecasts made at the end of 2006
. In terms of euros, national GDP for the first 10 months of the year amounted to 26.2 billion. The indicator of individual consumption increased by 6.2% over the year. The industrial sector and the service sector also showed significant growth – 13% and 11%, respectively. But the production of agricultural products has almost halved due to adverse weather conditions. Experts note that if it were not for the problems in the agricultural sector, GDP growth in 2007 could have been more than 10%!
In the post-socialist era, Bulgaria's economy has not grown at such a rapid pace. The combination of corporate income tax reduced to 10% in 2007 and strict fiscal policy proved to be very effective. The privatization process was successfully underway, and the public debt decreased to 25% of the BVP. It is also encouraging that the unemployment rate has fallen to 9% – this is the best indicator in the last 15 years. Of course, all this is connected with the country's accession to the EU, although not directly, but indirectly.
A well-developed banking sector, one of the most dynamic in Central and Eastern Europe, also contributes to the rapid development of the economy and the stimulation of foreign investment. The country's banks have already switched to the credit policy of the European Bank, reducing the main interest rates to 4%, which, given the inflation rate, makes loans very profitable. It is not surprising that in the first 10 months of 2007, the volume of loans increased by 60%. The borrowed funds are mainly used to stimulate imports and real estate.
Big plans
In 2007, Bulgaria received more than 5 billion euros of foreign direct investment, which is 28.5% of GDP – according to this indicator, the country ranks 4th in the EU! Of the total amount, almost 3.2 billion euros were allocated to the construction and real estate sectors, the financial sector and trade, while only 804 million euros were spent on industrial development. Overall, investment growth amounted to more than 29.6%.
According to experts, an increasing volume of investments will be directed to technological industries, which will increase the competitiveness of Bulgarian products and increase exports. The adoption of common European rules and customs tariffs as early as 2008 should have a strong impact on Bulgaria's foreign trade, and foreign investment and expected European subsidies should accelerate reforms and ensure the country's sustainable development.
The Bulgarian Government constantly emphasizes its determination to continue a strict fiscal policy, which will allow the formation of a budget reserve of about 3% of GDP in 2008 to reduce external risks. The introduction of European standards gradually ensures a stable legal environment and guarantees the safety of investments. However, it should be noted that corruption in the country is still not eradicated, which hinders a further increase in the flow of investments.
It won't be cheaper anymore
Foreigners can be found in different parts of Bulgaria more and more often, and their interest in the country increased long before joining the European Union. The number of tourists from Western Europe has been steadily increasing for several years in a row, which is largely due to how attractive Bulgarian real estate is for purchase. The first in the list of buyers are certainly the British, for whom Bulgaria, with its low prices and European prospects, has become a real discovery. In 2nd place are representatives of the countries of the former USSR, who discovered Sunny Beach and Golden Sands back in the days of Intourist.
Bulgarian real estate has risen in price rapidly since the beginning of the decade, but in recent years the growth rate has decreased slightly. With the accession to the EU, prices made another leap – in 2007, the average cost of housing in the country increased by about 30%. This is quite consistent with the increased investment activity – as already mentioned, about a third of all foreign investments last year were directed to the real estate and construction sector.
In 2007, almost every day in Bulgaria, another investment project with foreign participation was announced – a new business center or shopping mall, golf resort or residential complex. There has been increased interest in the land market, which is already in demand. The boom in the Bulgarian real estate market has created new jobs and had a significant impact on the growth of the economy as a whole.
However, now a serious problem has arisen in the way of further development of the market – insufficient infrastructure development, that is, roads, power grids, sewerage, etc. 2008 will be the beginning of mass implementation of infrastructure projects, since a significant part of the financial assistance of the European Union is directed specifically to this area. Special attention is paid to the construction of roads and highways, since the current Bulgarian communication routes lag far behind European standards and no longer correspond to the constantly growing automobile traffic.
It is expected that the main trend in the real estate market in 2008 will be a further increase in the number of foreign buyers who will focus on the highest quality offers. The less expensive part of the market will be more focused on domestic demand.
Although there is a lot of talk about a possible drop in prices and a "soap bubble", so far there are no real reasons to reduce the value of Bulgarian real estate, while there are more than enough prerequisites for continued price growth. Among them are rising prices for building materials, the already observed shortage of labor, and the availability of mortgage loans not only for Bulgarians, but also for foreigners. The growth in real estate prices is likely to slow down and amount to 15-20% per year, although especially high-quality projects with a favorable location will certainly rise in price more significantly.
Results and prospects
The first year in the European Union turned out to be very successful for Bulgaria. The country's competitive advantages such as advantageous location, still relatively cheap and skilled labor, and macroeconomic stability have worked. In order for the movement forward to be stable and long-term, the government must correctly assess what the country's economic growth can be based on in the near future, and orient future investments in the necessary direction.
Although the positive changes associated with EU accession are obvious at the macroeconomic level, it will be possible to talk about a noticeable improvement in the quality of life of the average citizen only in the next year or two. On the one hand, this is due to the receipt of European subsidies, on the other – to the introduction of a single personal income tax of 10% from January 1, 2008, as well as changes in the structure of payments to social funds, which shouldreduce the tax burden for both citizens and businesses.