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Ruse is among the stronger economies in Northern Bulgaria, but there are significant differences in the levels of economic development among the various municipalities within the region. As the main driver of local economies is manufacturing, the impact of the crisis on them is relatively limited, including in terms of the labor market, where the increase in unemployment since 2020 has been quickly corrected after returning to growth the following year. At the same time, the region faces a serious challenge regarding large inequalities in the local education systems, as well as worsening demographic indicators.

Industrial Leaders

The economies of the municipalities in the Ruse region are characterized by uneven levels of economic development. Several of them have significantly higher than the national average levels of value added per capita in 2020, while the rest lag far behind. According to the latest data, the leading municipality is Slivo Pole, with BGN 9,800 per person per year, surpassing the regional center Ruse (BGN 9,306 per person) for the first time. The reason for this is the substantial growth compared to the previous year. While Slivo Pole recorded a 14% increase in value-added, Ruse municipality saw a mere 0.8% growth. The municipalities of Vetovo and Byala also have relatively well-developed economies with annual growth rates of over 10%, but the remaining municipalities - Ivanovo, Dve Mogili, Borovo, and Tsenovo - have less than BGN 3,500 value added per person. Nominally, the largest local economy, with a total volume of BGN 1.45 billion, belongs to Ruse municipality, followed by Slivo Pole with BGN 96 million and Vetovo with BGN 78 million.

The backbone of the local economy in Ruse and the surrounding municipalities is manufacturing, including leading companies in the chemical industry, automotive production, and mining. The market leader in postal services, "Econt," also operates in the region, but overall, the leading service companies are concentrated in Ruse municipality. The strong industry places the region as a whole among the leaders in the country in terms of gross domestic product (GDP), with BGN 12,600 per person in 2020, although there has been a slight decline compared to the previous year. This, in turn, results in relatively high salaries and low poverty rates in Ruse.

Focused Investments

The significant presence of international capital in Ruse positions the region as one of the best in the country in terms of foreign direct investment, exceeding EUR 2.1 billion per person by the end of 2020. However, foreign-owned firms are highly concentrated in the regional center, with Ruse municipality accounting for EUR 341 million out of a total of EUR 445 million. In other words, the volume of foreign investments in the regional center amounts to EUR 2,200 per person. Data for the other municipalities, except Byala (where they amount to a mere EUR 87 per person), are confidential.

For this reason, the data on current investment activity presented through expenditures on the acquisition of long-term assets by non-financial enterprises are more indicative. Over the past two years, the most visible investment activity has been in Vetovo municipality, where expenditures for long-term assets reach BGN 2.6 billion per person, compared to BGN 2.1 billion per person in Slivo Pole and BGN 2 billion per person in the regional center. However, all municipalities, except Slivo Pole, have experienced a decline in investment expenditures in 2020 due to deteriorating economic conditions and increased uncertainty caused by the pandemic and the state of emergency.

The municipalities in the Ruse region are not particularly successful in attracting European funds. The only municipality that has surpassed the threshold of BGN 2,000 per person in total funding since the beginning of EU programs in Bulgaria by mid-2022 is the regional center. Most other municipalities within the region attract between BGN 500-700 per person, which is significantly below the national average level.

The Resilient Labor Market

Thanks to the industrial profile of the region (and the relatively small role of services, particularly tourism), the labor market in its municipalities remains relatively unaffected by the sharp decline during the pandemic year. The most significant decrease is observed in the share of employed individuals among the population aged 15 and above in economically active municipalities: a decrease of 3.4 percentage points between 2019 and 2020 in Ruse, and 1.6 in Slivo Pole. There are also significant differences in employment rates among the different municipalities. The share of employed individuals varies between 32% of the population aged 15 and above in the regional center to just 5.5% in the municipality of Tsenovo. These differences reflect both the overall job availability in different municipalities and the significantly greater choice.

According to the unemployment data published by the Employment Agency, 2021 was a year of recovery for regional labor markets in Ruse. The share of unemployed individuals among the working-age population decreased in all municipalities except Tsenovo, with most experiencing relatively rapid declines of 2-3 percentage points within a year. However, significant differences are also observed here. While the unemployment rate in the regional center was only 3.2% in 2021, it exceeded 10% in most municipalities and even reached 20% in Tsenovo and Vetovo. This suggests that the labor market challenges in the small municipalities of Ruse are not so much related to the short-term shock of the COVID crisis but rather the result of long-standing lower levels of economic development.

Weak Education

The future development of the labor market in Ruse largely depends on the output of the local education system and the skills accessible to future investors. However, the achievements of students in most municipalities do not provide much reason for optimism. Looking at the results of external assessments after the seventh grade, it becomes clear that only students in the municipality of Ruse manage to score more than 30 points out of a possible 100 in Bulgarian language and literature. There are also significant differences, typical for most municipalities in the country, in the results for mathematics, which are generally much lower. A similar pattern is observed in the high school graduation exams - it is striking that there are significant gaps between the results of several elite schools in the regional center and all the others. Some of the smaller municipalities in Ruse also face significant problems with student dropout rates, with Borovo having a dropout rate of 18% among students before the seventh grade, and Dve Mogili - 6%. Early dropout implies significant difficulties in accessing the labor market in the future.

Demographic Challenge

Similarly to other regions in Northern Bulgaria (excluding Varna), Ruse is facing extremely serious demographic challenges due to aging, migration out of the region, and low birth rates. In terms of natural population growth, the regional center performs the best, with a difference of 14.7 ‰ between birth and death rates in 2021, while in the municipalities of Ivanovo and Tsenovo, the indicator exceeds 30‰. In the past year, there has been a significant deterioration in natural population growth throughout the region (only a 5-point decrease in the Ruse municipality itself), primarily due to the peak in mortality as a result of the pandemic. Like other major economic centers, there has been a population outflow from the regional center to peripheral municipalities in 2020, with the Ruse municipality losing 1.3% of its population, while the largest growth occurred in Ivanovo (12%) and Slivo Pole (7%). However, in 2021, migration processes normalized and calmed down, with the regional center once again showing a positive balance of people leaving and settling within its territory.

Author: Adrian Nikolov