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The economies of the municipalities in Sofia (province) are closely linked to that of the capital city. While the city itself focuses on services, the peripheral municipalities specialize in various industrial and transportation activities. Significant differences in the levels of economic development are observed within the province, with the leading municipal economies being those of the Middle Mountains region and the industrial municipalities near Sofia. This combination leads to favorable conditions in the local labor markets, but significant demographic challenges are present, similar to almost the entire country.

• Diverse economies in Sofia

The municipalities within Sofia (province) have highly diverse levels of economic development, which is expected given its large geographic scope and different models. Broadly speaking, two centers emerge. One consists of the municipalities in immediate proximity to the capital city, such as Bozhurishte (21.5 thousand leva of value added per person in 2020), Elin Pelin (18.6 thousand leva/person), Kostinbrod (13.2 thousand leva/person), and Botevgrad (12 thousand leva/person), which have far surpassed the other municipalities in terms of economic development, with less than 5 thousand leva value added per person. The other center is the Srednogorie region. Although data on value added is lacking due to confidentiality, various other indicators (such as average salaries) indicate that Pirdop, Chelopech, and Mirkovo are among the most developed municipalities not only in the Sofia region but also in the country as a whole.

In contrast to the capital city, where services are the main driver of development, Sofia (province) owes its significant economic growth to a strong industry during the pre-crisis period. This is particularly true for Bozhurishte, where investments in the manufacturing industry have led to one of the fastest employment and income growth rates in recent years. A similar development model can be observed in Kostinbrod and the geographically more distant Botevgrad, where some of the leading industrial enterprises in the country operate. On the other hand, Elin Pelin concentrates a significant portion of logistics in Western Bulgaria, thanks to its proximity to both the highway and its excellent connection with Sofia city. Some of the municipalities closer to the capital city, such as Svoge, Ihtiman, and Slivnitsa, primarily serve as a source of labor force, as evident from the high daily labor migration. The clear division between the service-centered focus in Sofia and the strong industry in the surrounding municipalities and the Middle Mountains region demonstrates the need to think beyond the boundaries of provinces and municipalities towards integrated economic units.

• Focused investments

When examining the distribution of investments in the region, we encounter a lack of data on the leading economies of the Middle Mountains region. Otherwise, Chelopech, Pirdop, and Mirkovo would have ranked among the leaders in terms of foreign capital and expenditures on long-term assets. Outside of them, nominally, the leader in Foreign Direct Investment (FDI) in the province is Elin Pelin, which had attracted a total of 414 million euros of foreign capital by the end of 2020, followed by Botevgrad with 256 million euros and Bozhurishte with 228 million euros. Apart from these three municipalities (and the Middle Mountains region), there is also a significant presence of foreign investments in Kostinbrod, where the volume reaches 86 million euros. As expected, most of the invesmtnet is concentrated in industrial production, and in Elin Pelin - also in transportation and logistics. Weighted by population, Bozhurishte is the leader in FDI in the province, with 23.6 thousand euros per capita, followed by Elin Pelin (17.7 thousand euros per capita), with both municipalities being among the top 10 in the country in this indicator. The year of Covid-19 is characterized by small changes in the volume of investments, with the exception of Kostinbrod, where a decrease of 16 million euros is observed.

From the perspective of current investment activities, the highest expenses for the acquisition of fixed assets in 2020 were realized in Botevgrad (165 million leva), Elin Pelin (154 million leva), and Bozhurishte (60 million leva). However, it is important to note that while the Botevgrad case represents a one-time large investment, in the other municipalities, the expense levels for machinery, land, and buildings are relatively constant and rhythmic. As for expenditures related to European funds, almost all municipalities in the periphery of the capital city are characterized by a low absorption rate. An exception is Kostinbrod, where from the beginning of European investments in the country until mid-2021, 5.4 thousand leva per capita have been spent - one of the highest amounts in the country, mainly due to the construction of waste treatment facilities.

• The uneven labor market

Just like with macroeconomic indicators, significant differences can be observed among the individual municipalities in the composition of Sofia (province) regarding the labor market. This is most evident in terms of the employed population aged 15 and above, which varies from an impressive 81% in Chelopech to a mere 11% in Anton. It is noteworthy that municipalities with high local employment are also those with active local economies and high investments - in Botevgrad, Bozhurishte, Pirdop, Elin Pelin, and Kostinbrod, the share of employed individuals exceeds 40% of the working-age population, while in the remaining municipalities, it is below 25%. It is important to note that this indicator does not include those who work in neighboring settlements, which means that the actual employment in areas closely connected to the capital is higher. In terms of dynamics, most municipalities experienced a contraction of their local labor markets in 2020, with more severe cases seeing a decline of around 3-4 percentage points in the employment rate. An exception is Bozhurishte, which continued to add new jobs even during the pandemic year.

The positive influence of Sofia on local labor markets, despite the significant differences in employment, is also reflected in the low unemployment rate in most of the province. In 2021, the unemployment rate according to the Employment Agency was below 5% in 10 municipalities, and only Dolna Banya and Pravets had rates above 10%, both showing a clear downward trend compared to the previous year. Almost all municipalities in the province (except for Bozhurishte, Botevgrad, Anton, and Chelopech) registered a decrease in unemployment compared to the pandemic year.

Sofia (province) includes municipalities that traditionally rank highest in the country in terms of wages. The traditional leader in this indicator is Chelopech, where the average gross monthly salary for employees exceeded 2,600 leva in 2020. Salaries are also high in Pirdop - over 1,900 leva, as well as in Elin Pelin (1,600 leva).

• Educational Achievements

Despite the fact that good students from Sofia (the capital region) often choose to attend leading schools in the capital instead of studying in smaller municipalities, most of them achieve relatively good results in school education. This is particularly evident when reviewing the data from the national external evaluation after seventh grade, where for the 2021/22 academic year, most municipalities (except Anton) scored above 40 out of 100 possible points in the Bulgarian language and literature exam. The results in mathematics are not as conclusive, as no municipality achieves an average score above 50 points. However, this significant difference between the Bulgarian language and mathematics is a widespread problem, typical for almost all municipalities in the country. In the state matriculation exams, most municipalities in the region achieve high results, with the exception of Ihtiman. At this stage of education, however, the competition from elite high schools in Sofia has an even greater effect in attracting the best students. It is also notable that the wealthy municipalities in the Srednogorie region manage to attract many teachers, and the teacher-student ratio there is one of the most favorable in the country.

• Demographic Challenges

Similarly to almost all municipalities in the country, those in Sofia (province) suffer from significant demographic problems. However, the pandemic has led to a significant influx of population into the municipalities surrounding the capital. In 2020, all parts of Sofia (province) experienced a significant positive mechanical growth, reaching up to 190‰ in Gorna Malina and 152‰ in Bozhurishte. The effect of the pandemic is rather temporary, as in 2021, almost all municipalities start losing population again due to migration processes. Chavdar and Chelopech are exceptions, maintaining significant positive mechanical growth last year as well. From the perspective of the natural population dynamics, all municipalities have a negative natural growth rate, and according to the latest data, only in Ihtiman and Pravets is the coefficient below 10‰, while in five municipalities it has exceeded 20‰. At the same time, municipalities along the border with Serbia have one of the most aged populations in the country.

Author: Adrian Nikolov