Political stability, managed inflation, and support plans for the most vulnerable social groups and businesses could ensure a financially stable year in Bulgaria, according to Tsvetkova Bebov & Partners Managing Partner Nikolay Bebov.
"Last year was very interesting from a political perspective, as three parliamentary elections were held in Bulgaria," Bebov explains. "We had ‘regular’ elections in spring, which could not produce a stable configuration of the parliament, leading to two additional extraordinary elections. Finally, in November 2021, it was possible to elect a working parliament, with a coalition of four political parties, which put up a government in December. At the moment, we have a normal parliamentary process with the involvement of the opposition parties."
Bebov points out that the new parliament has to address some urgent legislative issues. "We still don’t have legislation regarding the budget for the year 2022. In normal circumstances, it would have been approved by November or December of the preceding year, but now we have to wait for a few more months until it is voted." However, Bebov says that the legislation provides for some interim arrangements for such cases, enabling a rather smooth transition.
"The new parliament is also aiming to implement some structural reforms, to improve judiciary and the efficiency of public administration, and to address problems with corruption," he says. "In addition, Bulgaria is joining the global trend to adopt measures to shift towards a green economy. However, such issues require not only a consensus on the legislative level but also a technocratic approach."
The business and social climate in Bulgaria is not very different from the rest of the region or even the world, Bebov notes. "COVID-19 remains a challenge for the health system, for the educational system, for budget spending, as well as for many businesses. Bulgaria also needs to improve the rate of vaccination compared with other EU countries. And the risks for further lockdowns may not be ruled out, even though COVID-related restrictions in Bulgaria remain mild."
According to him, "one of the most common negative trends in Bulgaria is the increased gas and energy prices, putting most of the energy-consuming industries in a very difficult position. The industries have to implement measures to maintain profit margins and manage costs." At the same time, he points out that the government is "under pressure to provide energy-related compensations to such industries heavily affected by current restrictions."
"Overall, like elsewhere, we have the biggest inflation numbers compared to the past years,” Bebov adds, noting that it has created challenges for the population, businesses, and the government, and led to increased public spending. However, he notes that "Bulgaria has a stable financial position and a low amount of external debts. On top of that, Bulgaria is economically and financially integrated into the EU. Therefore, we believe that the inflation rate will not be much different compared to other EU countries." Bebov points out, that as of January 1, 2024, Bulgaria plans to switch its currency from LEV to EUR, providing additional financial safeguards for the country.
"Another longer-term challenge is the Bulgarian demographics, in particular, decreased number of the population, aging, and increased migration rates," he says. "This problem has become particularly noticeable after several waves of the pandemic. A few governments in the past, as well as the current government, have been discussing the measures to stop these negative trends and to propose measures such as tax benefits for families which have more children, but these are rather strategies than specific plans."