Economic Overview

Bulgaria’s economic situation has improved significantly over the past few years, following a period of severe economic downturn in 1996-97 when it experienced triple-digit inflation and contraction of GDP by 10.6 per cent then 6.9 per cent. In May 1997, the government moved rapidly to stabilise the economy with assistance from the International Monetary Fund (IMF). A currency board was established, a three-year agreement was concluded with the IMF, and fiscal policy and structural reforms were adopted, as was a program of privatisation of state-owned enterprises. Immediate effects were increases in the price of electricity and fuel, and a dramatic increase in unemployment as a result of the closure of many unprofitable state-owned enterprises. Positive growth began to register from 1998.

Privatisation remains the focus of the present Saxe-Coburg government. Over the past four years close to 1,500 publicly owned enterprises have been sold or have been earmarked for sale. Currently in line for privatisation are the Bulgarian Telecommunications Company, a number of state banks and several regional electricity distribution companies. The government is making attempts to attract further foreign investment by combating embezzlement, corruption and legal violations.

Economic policy over 2003-04 can be expected to be driven by the government's commitments to the IMF. These emphasise tight fiscal policy, the completion of the government’s privatisation program and reduction of subsidies. Although the government may put more emphasis on social spending and reducing unemployment, its broad policy approach is unlikely to change.