• Area: 110,910 km² / 42,822 sq. miles
• Population: (31.12.2006): 7 679 290 ( 3 720 932 - male / 3 958 358 - female )
• Actual GDP growth: 6,2% (2007)
• Economy: (2007)  61.5% services, 32.3% industry and 6.2% agriculture
• People with university degrees: 22% of the population
• National language: Bulgarian
• Foreignlanguages: English, German, French, Spanish, Russian
• Religion: 83% Eastern Orthodox
• Governance: parliamentary republic
• Currency: Lev (BGN), pegged to the euro at 1.95583:1
• Memberships:EU, NATO, WTO

Bulgaria is located in the southeastern part of the Balkan Peninsula. The country is a crossroads between Europe and the vast markets of the Middle East, Russia and Asia. Bulgaria borders Greece and Turkey to the south, Macedonia to the southwest, and Serbia to the west. The Danube is the border between Bulgaria and Romania to the north, while the Black Sea constitutes the eastern border.

 

MACROECONOMIC PROFILE

The World Bank’s Doing Business 2008 report includes detailed information on Bulgaria. The report is being compiled for the fifth consecutive year and is considered by investors and international financial institutions. The report was presented in Bulgaria on October 10, 2007.

The reduction of the corporate income tax from 15 to 10 percent is the key change that has moved the country 7 positions ahead in the ranking. The introduction of the 10% flat-rate tax next year will probably give the country an even better position in the global index.

The introduction of private enforcers, which has reduced the time needed to enforce court judgments from 150 to 125 days, is another reform that has contributed to the overall ranking.

For investors trying to decide in which country in the region to start business, the comparisons in favor of Bulgaria are fairly good: ahead of Romania but after Slovakia and Hungary.

Improvements are still needed in the administration and the judiciary, business entry and exit, foreign trade documentation, licensing and property registration.

The World Bank’s Doing Business 2008 report also places Bulgaria among the top 10 reforming economies. The economies are ranked by the number of reforms and their impacts; initially, economies that had effected reforms on 3 or more indicators were selected, which were then ranked by the increase of the positive impact indicators over the previous year.

FOREIGN DIRECT INVESTMENTS

In 2006, Bulgaria ranked second by foreign direct investment in Southeastern Europe, behind Romania and ahead of Croatia. The total FDI in the region amounted to $26.348 billion, compared to $15.123 billion in 2005. In 2006, the FDI flows to the countries in Southeastern Europe and the Commonwealth of Independent States (CIS) have increased for sixth consecutive year, by 68% to billion, registering a significant rise over the two preceding years, as indicated in the World Investment Report 2007: Transnational Corporations, Extractive Industries and Development. The report is compiled every year by the United Nations Conference on Trade and Development (UNCTAD). In the region, the funds were concentrated in five countries: the Russian Federation, Romania, Kazakhstan, Ukraine and Bulgaria, which account for 82% of the foreign direct investment inflows to the region.

Bulgaria takes the impressive seventh place by FDI inflows, following Luxembourg, Hong Kong, Surinam, Iceland, Singapore and Malta; by this indicator, the country ranks third in the European Union. With its 16.4% FDI-to-GDP ratio, Bulgaria ranks first in Central and Eastern Europe. The FDI should not be explained only by low-cost labor and real estate deals. The World Bank’s Doing Business 2008 report, published in late September, positions Bulgaria among the top ten reformers. The positive changes include the reduction of the corporate income tax to 10%, the introduction of private enforcers, the implementation of technical passports for construction sites, and the overall aspiration towards transparency.

Based on preliminary data, in January – June, 2007, FDI in Bulgaria were EUR 2.112 billion  (7.9% of GDP), compared to EUR 2.015 billion (8% of GDP) in January – June, 2006. (Source: Bulgarian National Bank).

The equity capital flow in the time period January - June 2007 amounts to EUR 1.411 billion or 66.8% of total FDI. It has increased by EUR 657.2 million over the same period in 2006 (EUR 754.3 million). The equity capital includes also the revenues from the sale of real estate to foreign entities, which amount to EUR 817.4 million, compared to EUR 456.9 million in January – June, 2006.

 In January – June, 2007, the equity capital from privatization deals with non-residents who have acquired more than a 10% stake in a Bulgarian company amounts to EUR 1.4 million. The equity capital from other deals amounts to EUR 1.41 billion, compared to EUR 727.1 million for the same period in 2006.

 In January – June, 2007, the net other capital (the change in net payables between companies with foreign ownership and direct foreign investors on financial, bond and commercial credits) amounts to EUR 555.2 million, compared to EUR 1.122 billion in January – June, 2006.

 Based on preliminary data, the reinvested earnings for January – June, 2007 (non-residents’ share in the retained earnings or in the loss of the company) are estimated at EUR 146 million, compared to EUR 138.7 million in January – June, 2006.

GROSS DOMESTIC PRODUCT

According to preliminary data from the National Statistical Institute (NSI), the gross domestic product (GDP) for the second quarter of 2007 is BGN 12,980.4 based on current prices, or BGN 1,686 per capita. Given an average exchange rate of BGN 1.450965 to the dollar, the GDP is $8,946 million, or $1,162 per capita. In euro, the GDP is EUR 6,636.8 million or EUR 862 per capita.

The GDP has grown by 6.6% over the second quarter of 2006.

The gross valued-added generated by the national economy amounts to BGN 10,751.9 million by current prices. Recalculated in comparable prices, the value-added has increased by 8.7% over the respective period of the previous year.

REAL ESTATE

 Bulgaria is the first country in Central and Eastern Europe to introduce a national real estate index. The Bulgaria real estate and investor activity index (REMI) was initiated in September, 2002 by the Real Estate National Association (RENA), a member of the International real Estate Federation (FIABCI). This is the second national economic index after SOFIX and is regarded as a serious investment activity and business development indicator. The index is published monthly by the RENA, based on information provided by 157 member organizations that account for 80% of the market.

REMI is a public and generally accessible index. It is available to Bulgarian and foreign investors, financial institutions, the state administration, real estate consultants and many other entities.

The Bulgarian real estate market has been very dynamic over the past several years. Residences and apartments demand for in the larger cities is growing. Since 2003, the prices have followed an upward spiral. The demand for newly built apartments and offices is also growing, Such properties are increasingly sold at early construction stages, or even at the design stage. Clients, mostly foreigners, are looking for houses, summer houses and rural properties, mainly in the Rhodopi Mountains. The real estate along the Black Sea coast is very much desired by both domestic and foreign clients for investment purposes. The agricultural land market is also in revival. The greatest demand is for 50,000 m² to 100,000 m² lots for long-term investments. The housing rental market is less dynamic, both in terms of supply and demand, and in terms of prices.

The business projects are developing fast, while in residential properties the entrepreneurs are offering more extras. The real estate market continues to develop dynamically, given the price hikes of the past several years and the boom in the construction of office, commercial and residential buildings. This was demonstrated at the largest real estate and urban planning show on the Balkans, BalPEx, October 5- 7, 2007.

The entrepreneurs are shifting more and more towards the construction of residential compounds with SPA, as they try to access the premium segment of the market and keep higher prices. In the vacation properties segment, the entrepreneurs are also trying to compete by offering more extras that would categorize the apartments sold as high-end.