The Current State and Trends in Regional Development: A General Review

Economic development

Income and living conditions

The recovery of Bulgarian districts from the 2009 economic crisis has gradually accelerated. The Bulgarian gross domestic product equalled its pre-crisis level in 2014.

The recovery process has been differently paced in each district. Most of the country was affected by the crisis, and it was only the districts of Sofia, Plovdiv and Stara Zagora that did not report shrinkage of their gross domestic product (GDP) in 2009. A total of nine districts had reached their pre-crisis GDP level by 2012. The City of Sofia, Dobrich, Pazardzhik, Razgrad, Veliko Tarnovo and Yambol are also listed in this category.

Household incomes were also badly affected by the crisis, and the consequences were most noticeable in 2010. Unlike aggregate production, household income recovery to pre-crisis levels was a fact in most districts by 2012. Nonetheless, incomes continued to be affected by slow economic growth, though the average annual household income per capita has remained unchanged in 2014 – it has even dropped in 10 districts. The difference between the district with the highest incomes and the one with the lowest incomes per household member still exceeds 200% – 6,890 BGN per capita in Sofia (the capital) compared to 3,289 BGN per capita in Silistra.

The indicators regarding poverty and living conditions in Bulgaria remained steady in 2012 – the last year with relevant data available. The share of households featuring low intensity of economic activity, i.e. low employment, was the highest in districts with depressed labour markets (as of 2012). Montana, Pazardzhik, Smolyan and Vidin constitute examples of this relation. Pazardzhik is generally characterized by some of the most unfavourable indicators concerning poverty and living conditions, but the quick recovery of the local labour market in 2013 and 2014 will probably improve these indicators in the years to come. In addition to Pazardzhik, the districts of Sliven and Vidin also had 1/3 of their population below the respective region’s poverty line.

Labour market

It was only in 2014 that the recovery of the labour markets gathered momentum. Following the general slump in the employment rate in 2009 and 2010, about half the districts have started to report some growth in their employment rates since 2011. However, this increase has been due to the faster drop in the workforce compared to the rate of decrease in the number of employed people. The unemployment rate continued to grow in most districts till 2013 thus causing steady growth of the population’s economic activity coefficient.

The long-expected positive reversal on the labour market, both nationally and regionally, occurred in most districts in 2014. In 2014 the growth of the employment rate was mainly due to the considerable number of new jobs, and not due to negative demographic trends and a drop in the workforce in Bulgaria. The employment rate increased in 19 out of the 28 districts, but the employment was far below its pre-crisis levels in most districts. The districts of Kardzhali, Razgrad, Shumen and Veliko Tarnovo represent the only exceptions.

There is a different picture in several districts where the employment rate suffered the most from the crisis,. Lovech district, where the employment rate in 2014 was still lower by 11.2 percentage points than that in 2008, is the ‘champion’ among them. Other districts with a sharp drop in employment during the crisis were Kyustendil (–7.8 pp), Blagoevgrad (–6.6 pp), Smolyan (-6.2 pp), Sliven (-6.1 pp), Silistra (-5.9 pp) and Varna (-5 pp). The crisis aggravated the structural weaknesses of the local economies in some of them. Kyustendil, Silistra and Sliven represent such typical examples. The economic hardships in these districts have caused the emigration of people in fertile age, potential members of the workforce, which has intensified the negative demographic processes.

Despite the obvious recovery of employment in the country as a whole in 2014, some districts have not taken part in this process and retain critically low employment rates – below 40%. All of them are located in the northern part of Bulgaria – Lovech, Silistra, Vidin and Vratsa. These districts, excluding Lovech, also featured very high unemployment rates: 18.1% for Vratsa, and more than 22% in Vidin and Silistra for 2014, twice the average for the country (11.4%). Lovech ranks last among all districts in the rate of economic activity. Barely 36.9% of the population 15+ is employed or jobless, and the rest neither works nor actively looks for a job.

Investment

The local labour market problems are usually related to traditionally low investment. Some of the most poorly developed districts also feature a comparatively small number of operating non-financial companies relative to the population. In 2013 Kardzhali, Montana, Silistra, Targovishte, Vidin and Vratsa reported between 29 and 33 enterprises per 1,000 people relative to 52 for Bulgaria. Some of these districts rank among the most unfavourable destinations for foreign direct investment (FDI). The districts of Haskovo, Kardzhali, Kyustendil, Montana, Silistra, Sliven, Smolyan, Shumen and Yambol attracted less than EUR 1,000 per capita in 2013 (in cumulative terms), or three times less than the country average.

With the onset of the crisis at the end of 2008, foreign investment was badly affected, and some districts even reported a net outflow. Among those, Pernik, Sofia (capital city) and Varna experienced the greatest boom in construction till 2008. Simultaneously, some districts like Burgas, Pazardzhik, Plovdiv, Sofia and Stara Zagora managed to attract considerable foreign investment after the crisis. Compared to 2008, it almost quadrupled in Burgas at the end of 2013.

Direct foreign investment is often interrelated with high expenditure on the acquisition of fixed tangible assets (FTA)[1]. In 2013 investments in FTA ranked second in Burgas to those in the capital Sofia related to the local population. The drop in investment was the biggest in some of the leading economic centres – for instance, investment halved in 2013 relative to 2008 in Sofia (capital city), Ruse, Smolyan and Varna, and was three times less in Pernik and Stara Zagora.

Some districts have managed to compensate the low private investment since 2009 with European funds. An example of such a successful anti-crisis policy were the municipalities of the Lovech district that ranked it third in terms of utilisation of EU funds as of 31 January 2015 – almost 1,000 BGN per capita. The districts of Kardzhali, Razgrad, Vidin, Vratsa and Yambol provide more good examples. While Gabrovo and Burgas have remained leaders in attracting EU funds, leaders in economic terms, such as Sofia (capital city), Plovdiv, Stara Zagora and Varna, have performed relatively poorly.

Infrastructure

Infrastructure constitutes an important factor in the districts’ economic development and is probably one of the reasons why those in North Bulgaria are lagging behind. Infrastructure development, however, has made slow progress throughout Bulgaria. The share of roads in good condition increased from 39.6% in 2013 to 40.5% in 2014. Sliven is the leader featuring an almost double relative share of roads in good condition compared with that in the country as a whole. Almost half the roads in the districts of Blagoevgrad, Pazardzhik, Pernik, Stara Zagora and Smolyan are also in good condition. Less than a third of the roads in Haskovo, Kardzhali, Montana, Ruse, Sofia and Vratsa are in good condition.

Owing to public investment in building road infrastructure, the density of the road network has gradually increased in the districts where the new roads pass. The road network density increased in 2013 in Burgas, Kyustendil, Pernik, Shumen and Yambol, but in the country as a whole, the average density of roads per square km remained the same compared to 2012 – 17.7 km/sq. km. Simultaneously, the railway network density gradually decreased following the discontinuation of low-effective lines. In 2013 the railway network density decreased most in the district of Yambol.

The number of households with Internet access has grown considerably for the past several years – 56.7% of households had access to the Internet in 2014, or twice as many compared to five years earlier. Some of the most underdeveloped districts also have the lowest rate of access to the Internet – less than 40% of the households in Kyustendil and Vratsa have such access.

Taxes and fees

Regarding the local tax environment, it is notable that the local authorities’ approach mostly depends on the availability or lack of investment and operating businesses. The levels of local taxes and fees remain relatively high in the biggest economic centres, and relatively low in the less developed districts. Nevertheless, neither do high taxes and fees discourage investors from starting businesses, or the population from emigrating to districts with relatively high tax burdens, nor do low taxes and fees manage to attract entrepreneurs and migrants to the less developed districts. Therefore, other factors, such as the size of the local market, the infrastructure quality, the availability of a suitable workforce, job opportunities, the social environment, etc., weigh much more heavily on investors’ decisions to start a business or to move to a particular municipality or district.

No significant changes in local taxes and fees have been noted in recent years. Changes regarding the annual license tax for retailers have been the most uncommon, and the most common have been the ones regarding the annual waste collection charge for real estate owned by legal entities. The waste collection charge was the only one decreased more times (57) than it was increased (54) from 2013 to 2015.

Administration

Local administrative bodies have varying success in terms of the administrative services they offer. Generally, Bulgaria has made more progress with regard to “one-stop shop” services compared to the development of e-services. Regarding the integrated “one-stop shop” services, municipalities have generally completed stage 4 or 5 – ‘Working’ and ‘Developing’. It is only in the district of Varna that most municipalities have reported the completion of the final sixth stage, ‘Excellent’, in 2015. Progress has been slower concerning e-services. About 2/3 of municipalities have reported that they do not offer such services. For 2015, such municipalities predominate in the districts of Blagoevgrad, Kardzhali, Ruse, Shumen, Silistra, Sofia and Vidin. Varna is once more distinguished as a good example, since Varna Municipality has offered the highest degree of electronic services in 2015 – at the so-called ‘transaction level’– that allows deals to be completed, including payment and delivery.

The progress of the share of territory included in the cadastral map has lagged behind in most districts of Bulgaria, which is an obstacle before investment, especially when new construction is planned. In 2014 less than one fifth the entire territory of the country was included in the cadastral map (18.1%). Only Sofia (capital city) and Lovech stand out with their high coverage – 95.8%, and 74% respectively, in 2014. In the districts of Haskovo, Kardzhali, Pernik, Veliko Tarnovo, Vidin and Vratsa the picture is radically different where the share of territory included in cadastral maps was less than 10%.

In addition to the slow progress of developing cadastral maps and e-services, the transparency of local administrations also poses a challenge. According to the 2015 Active Transparency Rating of local government bodies by the "Access to Information Program" Foundation (AIP), the districts of Dobrich, Gabrovo, Sliven and Sofia (capital city) occupy the top of the ranking, while the districts of Kardzhali, Kyustendil and Sofia rank at the bottom.

Social development

Demography

The demographic background, though unfavourable throughout Bulgaria, is relatively better in districts that are more active in investment and business, offer more job opportunities and higher incomes. The districts of Kardzhali and Sliven – the economies of which are rated ‘average’ and ‘unsatisfactory’, respectively, but which have a good demographic rating – are the only exception. The ‘good’ demographic rating of the district of Sliven is mainly due to the traditionally high birthrate. Sliven reported the highest birthrate in the country once again in 2014, 12.4‰. This leads to relatively favourable age dependency ratios in the district of Sliven, too. Kardzhali, on its part, reported an unusually high net migration rate (12‰) in 2014 because of the high number of immigrants, one third of which came from other districts in Bulgaria, and over two thirds - from abroad. The rate of natural increase in the district of Kardzhali has also been traditionally more favourable compared to the country’s average, which slows down the population ageing process.

Only six districts had a positive net migration rate in 2014, i.e. the number of settlers was higher than the number of those who left. Sofia (capital city), Burgas, Varna, Haskovo, Kardzhali, and Stara Zagora had such net migration rate, and the immigration in the first three districts maintained more favourable age dependency ratios relative to Bulgaria’s average ones. On the other hand, the districts with the fastest ageing population at the end of 2014 were Gabrovo, Kyustendil and Vidin. In these districts, there are more than two people aged 65+ per child aged 0 to 14, and the ratio of those aged 65+ to those aged 15–64 was more than 40%. In comparison, the national average age dependency ratios were much more favourable in 2014: 144.3 and 30.2%, respectively.

Education

As a rule, the underdeveloped territories also perform less well in the field of education. Education in the districts of Montana, Razgrad, Sliven and Silistra got the lowest rating, with a variety of problems: a high share of dropouts and repeaters, poor results at state matriculation exams on graduation from secondary school, lack of higher education establishments or a small number of students, and a low share of people with university degrees. Each of these districts exhibits several or all of the mentioned problems. In Sliven net enrolment is relatively low, too, while teacher – student ratios point to an insufficient number of teachers.

Yet, there are exceptions from the rule that education fails to do well in economically less developed territories, and vice versa. Veliko Tarnovo is one –economically, the region ranks near the bottom, but it has one of the highest ratings in education, mostly due to the reputation of the University of Veliko Tarnovo and the high share of people with tertiary degrees in the local population. The district of Smolyan is another similar example, rated ‘unsatisfactory’ in economic development, but ‘good’ in education. These exceptions demonstrate that though social development is often predetermined by economic development, it is possible to achieve good quality and coverage of education even in a less developed local economy.

Healthcare

In healthcare there was a drop of 20% in the cases of hospitalisation in 2014. Though the number of hospitalized patients is used as an indicator for the morbidity rate of the population, the reason for the drop should be sought in the considerably shrunk budget of the National Health Insurance Fund (NHIF) for that year.

Access to healthcare has gradually increased. The number of beds in MpHATs increased in 17 districts, remained the same in four and decreased in seven in 2014. Due to the continuously dropping population figures, the ratio of hospital beds to population number got worse only in the districts of Burgas, Dobrich and Pazardzhik. One of the more notable increases in the number of hospital beds was in Smolyan where the hospital in the town of Devin was reopened in 2014.

The increasing number of cardiologists - for seven years in a row - is yet another positive trend. While there were 878 cardiologists in 2007, their number increased to 1,253 in 2014, which means there were 5,765 people per cardiologist. The number of internists and general practitioners, however, has continued to drop – for three and two years in a row, respectively.

Security and justice

In security and justice a relation between the economic development and the social environment has been noted throughout the districts, though pointing in the opposite direction. The more economically developed the district, the more problems it faces both in the functioning of the judicial system and in the number of registered crimes against the person and property.

With regard to security and justice, the most developed district, Sofia (capital city), has the worst indicators. This district, along with Blagoevgrad, Burgas and Varna has some of the lowest ranks in terms of security and the effectiveness of the local judicial power, while all four rank at the top in terms of economic development. On the other hand, Kardzhali, Lovech, Silistra and Smolyan feature low crime rates and relatively efficient local judicial systems, but poor economic development. There are also exceptions – for instance, Gabrovo has one of the best economic indicators and also a comparatively low crime rate, a moderate workload and relative effectiveness of penal judges in the District Court. Kyustendil, Montana and Sliven represent examples of poor economy and also of poor performance in the field of security and justice.

On the whole, the actual workload of penal judges in District Courts decreased between 2011 and 2013 (from 10.8 cases per month in 2010 to 8.3 cases per month in 2013). This trend could be explained, at least partially, with the decreased number of registered crimes against both property and the person in 2013 compared to 2010. Falling crime rates can be noted throughout all districts of Bulgaria, without exception, judging by the number of registered crimes against property. In view of this fact, the reasons for a rising share of pending criminal cases accompanied by a falling share of cases closed in the first 3 months in most districts in 2013, compared to three years earlier, could hardly be explained. The aggravation of these indicators demonstrates decreased effectiveness of the judicial system in most districts.

Environment

Environmental quality is also related to the social environment of the districts. Considerable European funds for projects in environmental protection, more specifically for the construction of sewage and waste water treatment plants, have been absorbed in recent years.

Only in 2013 expenditure on environmental protection was 2.1 billion BGN, which represents an increase of 400 m BGN in comparison with 2012. Nonetheless, the share of the population living in settlements with public sewerage systems increased only symbolically: from 74.3% in 2012 to 74.7% in 2013. The share of the population living in settlements with public sewerage systems, connected to waste water treatment plants, also demonstrated a meagre advance: from 56.1% in 2012 to 56.4% in 2013. Less than 5% of the population in the districts of Kyustendil, Silistra, Vidin and Yambol is connected to sewage flowing out at waste water treatment plants.

Serving the population via waste water treatment plants is better than the average in the Black Sea districts of Burgas (61.2%), Varna (86. 2%) and Dobrich (70.8%), but many of the waste water treatment plants have proved to be insufficient in serving the huge number of tourists during the summer tourist season. This causes leakages of waste water into the sea and negatively impacts the image of the Bulgarian Black Sea coast as a tourist destination.

Air purity constitutes another important element of the environment. Carbon dioxide emissions continually dropped in 2012 and 2013, which was especially notable in the district of Stara Zagora. Although it remained the region with the highest concentration of harmful emissions per sq. km in Bulgaria, the emissions decreased to 3,405 t/sq. km in 2013 compared to 4,873 t/sq. km in 2011. Emissions in the other two districts with the most contaminated air, Sofia (capital city) and Varna, also considerably decreased in 2013. The reasons for their lower level are both the investments in treatment facilities in industry and the population’s gradual transition from using solid fuel for heating to cleaner sources of power (gas and electricity) with the general increase of living standards.

Culture

Cultural activities also play an important role in the creation and development of the social environment and the living conditions throughout the districts. All of the observed indicators in the field of culture increased in 2014. Visits to the cinema increased by 337,000 to 5.1 m in 2014 or 706 per thousand people, which was due in part to the opening of cinemas in several districts that had lacked cinemas till 2014, i.e. Razgrad, Shumen, Smolyan, Silistra and Vidin.

Visits to the theatre have also demonstrated an ongoing trend of increase for the past several years, even though theatre remained less popular with 319 attendances per one thousand people on average for Bulgaria in 2014. Sofia (capital city), Ruse and Targovishte reported the highest popularity of theatre performances among the local population.

The annual average number of museum and library visits has also grown in recent years. More than 1,000 visits (per 1,000 people) have been reported both to museums and libraries in Sofia (capital city) and in Veliko Tarnovo. A relatively high interest in museum exhibitions has been noted in the districts of Dobrich, Gabrovo, Sofia and Vidin.