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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.