News

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As part of the presentation of the new “Regional profiles 2020”, during the week the IME conducted a focused discussion over the development of south Bulgaria. The entire conversation can be traced here, and the presentation is available here.

Unlike the economies of North Bulgaria, where a few economic centres of relatively equal weight compete, to the south Sofia makes up more than half of the entire economy. Its GDP reached 51 billion leva during 2019, and almost 55 billion if we add the contribution of the municipalities in the surrounding area, integrally linked with the capital. The industrial economy of Plovdiv dominates the South central region with 9.6 billion leva GDP. In the Southeastern region, a particular balance between Burgas and Stara Zagora is observed, with 5.5 and 5.1 billion leva GDP respectively.

The distribution of the primary economic activities is, however, quite different. Although the capital continues to prevail with 5.8 billion leva gross value added in manufacturing, the other leading areas are not that far behind - Plovdiv recorded almost 3 billion leva gross value added in manufacturing for 2019, while Stara Zagora – 2.5 billion leva. To a large extent, this can be attributed to the critical role, which investment and the development of the manufacturing industry have played for the economic progress in almost all regions outside the capital in the last decade.

Conversely, the capital is even more dominant in the service sector, where gross value added reached 38.4 billion leva in 2019, while in the second district, Plovdiv amounted to only 5.1 billion leva. Such a concentration in services is not surprising - ⅕ of the population of the country live in the capital, and those have the highest incomes and purchasing power. Moreover, almost the entire ICT and outsourcing sectors are concentrated in Sofia. These activities are not only the most rapidly growing ones in recent years, but also those which provide the highest average salaries in the Bulgarian economy. It is exactly these types of services which have the potential to turn into an engine for growth for some other regions as well, especially those with more favorable labor force structure.

If we can talk about development on “two speeds”, then the mountainous regions of south Bulgaria fall greatly behind from the dynamic economic development processes since 2014. It is not that they have not demonstrated significant improvement in most indicators, from unemployment, through household income, to investments, but these do not amount to growth comparable with the one of Sofia or Plovdiv.

Differences of economic development can also to a large extent be attributed to the structure and particularities of the labor force. The regions, where high technologies break through most easily also cluster the most people with higher education, while in the ‘industrial’ sectors predominate workers mostly with secondary and professional education. Serious economic problems also feature in the regions where citizens with secondary and lower education make up the majority of the labor force - in 2019 they exceeded 20% in Sliven, Kardjali, Yambol and Pazardjik.

The speed of economic development has an impact on the demographic dynamics, particularly that of internal migration. This is the reason why Plovdiv, Burgas and Sofia have recently featured positive coefficients of mechanical population growth rate, while Sliven, Smolyan, Kyustendil and Yambol gradually depopulate due to migration toward the more dynamic economic centres of the country or abroad.

Finally, we cannot omit last year’s Covid-19 crisis, which affected unevenly the regions of south Bulgaria. Despite there being no intact regions, the ones where manufacturing and high technology weighted more heavily overcame the temporary shock of the first months quicker. In contrast, the problems of the regions more reliant on tourism and the manufacturing industries with lower value added have been aggravated, especially if we consider the state of the labor market. 

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During the week, as an addition to the new “Regional profiles 2020”, the IME conducted a focused discussion on the development of North Bulgaria. The entire conversation can be traced here, and the presentation is available here. An overview of the discussion can be read on the pages of Capital weekly newspaper (see here). On February 9^th, 2021, the IME will conduct a discussion on the development of South Bulgaria as well.

A look at the North Bulgarian economies shows that the trajectory and the developmental models of the distinct regions differ. The clear leader in the Northeast, which besets the region’s indicators, is Varna, with GDP of 7.7 bln out of the 12.3 bln leva of the entire Northeastern region. Varna is also the only northern region, which has managed to attract people in the last decade. A combination of an influx of young and active citizens, a strong service sector, including traditional tourism, but also increasing number of digital companies, as well as developed industry, justify the good prospects for the spatial development of the marine capital.

In the Northern central region there is a particular polycentrism, as three districts - Ruse, Veliko Tarnovo and Gabrovo, define the development model. In the region as a whole, the role of manufacturing is greater than the national average. This is particularly evident in Gabrovo, where 45% of the gross value added is in industry. The services sector is progressing in all three districts, while the bigger Ruse and Veliko Tarnovo remain at the forefront. The better vertical integration of the three centers, and creating a link towards South Bulgaria is critical in the long-term development of the region.

While in the Northeastern and North central regions certain positive trends partly balance out the endemic problems, in the Northwest heavier challenges linger. In the context of the great demographic problem - depopulation and impaired age structure, the common tendency for inferior employment relative to the other regions, highlights these issues. In view of the size of the regional economies, and the figures purporting the gross value added, the developmental trajectory of the northwest will increasingly depend on the economies of Pleven and Vratza, and on the connectivity and the industrial progress of the wider periphery of the capital.

Although the country has seen substantial wage growth in all districts in recent years, regional differences persist. The Northeast region has the lead in salaries with higher wages in Varna city, as well as in the manufacturing sectors of municipalities in the near vicinity. We observe marked wage growth in the Northwestern and the North central regions, but in the former the effect of the nuclear power plant has to be accounted for, as it ‘weighs’ calculations of regional average.

Along with manufacturing, the development of digital services is key for Bulgaria’s economic growth. The Northeast features a continuous increase of the employed in the ICT sector, as Varna contests Plovdiv for the second place in digital services in the country, after Sofia. The bigger cities in the Northwest and North central region have also reported similar increases, albeit on a smaller scale. On the basis of the declared interest and expressed investment intentions, we can soon expect a more noticeable change in the North central region’s figures, especially in Ruse, Veliko Tarnovo and Gabrovo.

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We already reviewed the goal and main features of the social service “Domestic social patronage” (DSP), offered by the municipalities. The crisis and the state of emergency have demonstrated this service is an even more important tool in addressing the needs of the elderly and of citizens with special needs.

Following a thorough examination of the data received from the Agency of social assistance (ASA) and of all municipal budgets available for the last few years, we can now offer a more accurate depiction of DSP.

The Domestic social patronage has been acknowledged as one of the most comprehensive local level social services. It entails primarily food and medicine delivery, household services, special aid, social contact, etc. In recent years, DSP has provided support to nearly 40,000 people per annum. In 2019, it reached 37,943 people from around the country. The vacant places are 6,373, or 17% of the total capacity. Although in 33 municipalities the social service is not available, similar services are at place as a substitute.

The annual expenses of the social patronage amount to around 340 thousand leva on average per municipality, or 22 leva per person, according to data from the municipal budgets from 2019 and 2020. In the capital, the annual budget for DSP is close to 6 million leva (covering 1,658 people), in Varna – 3 million (550 people), in Burgas – 2 million (850 people), while in Plovdiv – 1 million leva for the 400 people covered.

There are notable distinctions among the different districts and municipalities which provide the service. Social patronage covers over 1000 per 100 thousand people of the population in the districts of Dobrich, Montana, Pleven and Razgrad. Conversely, in the districts of Smolyan, Kardjali and the capital, under 300 per 100,000 people from the pertinent population receive the aid. The proportion of people included as a share of those over 65, the main target group of DSP, reveals a similar picture. In the districts of Montana, Pleven and Razgrad around 50 out of every 1000 people over 65 are included in DSP, while in Smolyan and the Capital they hardly number 10.

The Domestic social patronage is particularly important for the everyday arrangements of people in need (mostly the elderly), but also limits social isolation, and is often better and cheaper alternative to their institutionalization.