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General Economic indicators

Indicators 2000 2001 2002 2003
GDP (EUR bln) 13.7 15.1 16.5 17.6
GDP per capita (EUR) 1.674 1.919 2.101 2.249
Real GDP growth rate (%) 5.4 4.1 4.8 4.3
Industrial production rate (%) 4.6 2.2 4.6 15.2
Annual inflation rate (%) 11.4 4.8 3.8 5.6
Annual unemployment rate (%) 16.4 19.5 16.8 12.7
Average monthly gross salary (EUR) n/a 139 147 149
Current account balance (EUR) -761.4 -1010.6 -925.5 -1505.2
Gross external debt stock (EUR mln) 11.9 11.9 10.8 10.5
Foreign exchange reserves (EUR bln) 3.7 4.1 4.6 5.3

Fiscal and Monetary Policy

In 2003, Bulgarias economy continued to track with its target of 4.5 % average annual growth. In contrast, the Eurozone grew at 0.4 %.

Bulgaria owes its progress to sound monetary and fiscal policies in effect since 1997. A currency board, a fixed exchange rate, and conservative fiscal policy have led to steady economic growth and a declining government deficit, creating a business climate conductive to private investments. In 2003,, government deficit-to-Gross Domestic Product (GDP) ratio was 0.0 percent. Other indicators suggest fundamental and continuing macroeconomic strength and stability.

Gross Domestic Product

In 2003, Bulgarias strong industrial sector registered 7.1 percent growth in sales overall, and 15 percent growth in production, leading to overall growth of GDP. At the same time, the services sector continued steady growth at 3.5 percent, and now accounts for more than 58 percent of GDP. This data supports the EU conclusion that Bulgaria has a full functioning free market economy. Exports of both products and services grew in real terms by nearly nine percent. Finance and trade remained strong, continuing the sectors trend of 20 percent annual growth. Increasing ages and new jobs more than 307 000 new jobs created, with nearly 40 percent of those previously categorized as long-term unemployment led to a strong consumer demand for credit and continued expansion within financial services sector.

GDP per capita

Even as Bulgarias economy continues to shift towards services at an increasing rate, indicative of an economy growing in sophistication. Bulgarias costs remain below the EU. Bulgarias service sector grew at rate of 3.5 percent in 2003, and now accounts for 58.6 percent of GDP, up from 3.5 percent in 1998. Yet, Bulgarias EUR 2.249 per capita GDP remains only 30 percent of the EU, leading to the conclusion that Bulgaria currently offers a major growth opportunity and attractive return on investment.

Low and stable inflation

One of Bulgarias success stories has been its stable currency. The Bulgarian lev has been pegged to the Euro since 1997, obviously, with a zero fluctuation in terms of exchange rates. By comparison, neighboring states have experienced fluctuations ranging from 100 percent to 250 percent during the same period.

In 2003, Bulgarias average inflation rate was 5.6. By comparison, South East Europe neighboring states ranged from a high in Romania of 15.3 percent to a low in Croatia of 1.5 percent.

Interest rates

The pattern of interest rates reflects the usual seasonal swings and other one off influences. For example, given that money demand for transaction purposes is usually high at the end of the year, commercial banks therefore tend to maintain their liquidity at a higher than average level, with a resulting upward spike. Or, a major investor launches a project in Bulgaria, arranges a deal with a commercial bank, and the size of that deal and the likelihood of favorable interest rate negotiated will create a download spike - reflecting the size of that deal and the market overall.

Such influences create a bounce in the trend line, but long term data confirm continuing decline in interest rates, reflecting the monetary and fiscal policy which has guided Bulgarias recovery since 1997, increasing competition following the success privatization of the banking sector and the number and growth of commercial banks responding to market opportunity.

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