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Bulgaria

Politics:

  • Analysis

    Bulgaria politics: Poverty protests

    Bulgaria's crisis: Poverty protests

    Desperate demonstrations against an ephemeral government

    SIX people have set themselves on fire in Bulgaria in less than a month. Three have died. The death by self-immolation of Plamen Goranov, a 36-year-old amateur photographer and rock climber, especially shocked the public. Mr Goranov has become Bulgaria's Jan Palach (the student who set himself on fire in 1969 to protest against the Soviet invasion of Czechoslovakia), a symbol of the protests that have rocked the country in recent weeks. "You fired up our courage and love for freedom", said one banner at the national day of mourning following his death.

    Self-immolation is not a new phenomenon in Bulgaria. According to Médecins Sans Frontières, a medical charity, Bulgaria, a country of 7.3m people, had an average of 7.4 self-immolations a year between 1983 and 2002, most of them politically motivated. Yet this wave of protests--and individuals' willingness to make the ultimate sacrifice for political goals--is worse than any previous one since the collapse of communism. Bulgarians have been worn down by rampant corruption, mismanagement in both the public and the private sector, useless bureaucracy, high unemployment and poverty. "The deep-seated cause for the political crisis is poverty," says Kristofor Pavlov, chief economist at UniCredit Bulbank in Sofia.

    The protests have already brought down the government of Boyko Borisov, who resigned last month, ostensibly because, in his own words, he "won't participate in a government under which the police are beating people". In early March Rosen Plevneliev, the president, announced a caretaker cabinet led by Marin Raykov, a former ambassador to France (who will also double as foreign minister). On the day the president announced the interim government a couple of hundred protesters threw toilet rolls at the parliament building and carried brooms and signs saying "Let's sweep out the trash".

    The new government of mostly competent technocrats cannot do much before the general election on May 12th. "We will try, with the limited resources and little time at our disposal, to help the most vulnerable parts of the population," says Deyana Kostadinova, deputy prime minister and labour minister. Unemployment went above 12% in February, its highest since 2005. More than 22% of the population live below the official poverty line. The average monthly wage is EUR400 ($517).

    The question is who will win the election in May--and whether the winners will be able to restore calm, stick to Bulgaria's policy of fiscal austerity and finally clean the Augean stables of corporate Bulgaria. This would help the country to secure much-needed European Union (EU) funds. Until now it has been a laggard in absorption of EU money.

    In the first opinion polls since his government's resignation, Mr Borisov's centre-right Citizens for European Development of Bulgaria (GERB) held a slight lead over the Socialist opposition. According to Gallup, support for GERB was at 19.7%, down from 22% in February; support for the Socialist Party fell to 18.6% from 22%. Mr Borisov's resignation (widely seen as a tactical move to preserve the political capital that GERB had left) seems to have paid off. More worrying is the rise of the far-right nationalist Attack party: its support jumped to 5% from 1.2% in February. Attack will be the election's wild card: none of the main parties wants to form a coalition with the extremist group.

    March 23, 2013

  • Background

    Bulgaria: Political forces at a glance

    Political outlook: Political forces at a glance

    Government: Bulgaria is a parliamentary democracy. Parliament consists of the single-chamber, 240-seat National Assembly. Since the election in July 2009, the centre-right Citizens for European Development of Bulgaria (CEDB) has governed alone, despite lacking a parliamentary majority (it won 117 seats in parliament). The government is headed by the prime minister, Boiko Borisov, who is also the leader of the CEDB. The president is Rosen Plevneliev, a former minister of regional development in the CEDB government, who was elected in October 2011.

    Parliamentary forces after the election on Jul 5th 2009
     % of voteNo. of seats
    Citizens for European Development of Bulgaria39.7117
    Coalition for Bulgaria (Bulgarian Socialist Party & partners)17.740
    Movement for Rights & Freedoms14.537
    Ataka9.421
    The Blue Coalition (Union of Democratic Forces & Democrats for a Strong Bulgaria)6.815
    Law, Justice & Order Partya4.110
    Total incl others100.0240
    a The parliamentary group of the party was dissolved, as one of its members left the group and the members fell below the minimum requirement. Its members of parliament are now independent.
    Source: Central Election Commission.

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    Next elections: According to the constitution, the parliament has a four-year term following an election and the president has a five-year term of office. The next parliamentary election is to be held in mid-2013. The next presidential election will be held in October 2016.

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    June 01, 2012

  • Structure

    Bulgaria: Political structure

    Official name

    Republic of Bulgaria

    Legal system

    Based on the constitution of July 1991

    National legislature

    Unicameral National Assembly of 240 members, elected by proportional representation. Following the election in July 2009, Citizens for European Development of Bulgaria is the largest parliamentary party

    Electoral system

    Universal direct suffrage from the age of 18

    National elections

    October 2011 (presidential) and July 4th 2009 (parliamentary). Next presidential election due in October 2016; pre-term parliamentary election May 12th 2013

    Head of state

    Rosen Plevneliev, elected president in October 2011

    National government

    Caretaker government

    Main political parties and groupings

    Bulgarian Socialist Party (BSP; previously the Bulgarian Communist Party); National Movement for Stability and Progress (NMSP; formerly the Simeon II National Movement, centred on the former king Simeon Saxe-Coburg); Movement for Rights and Freedoms (MRF; formed mainly from the ethnic Turkish minority); Bulgarian New Democracy (BND; formed by rebel NMSP deputies in December 2007), Blue Coalition (comprising the Union of Democratic Forces/UDF and Democrats for a Strong Bulgaria/DSB, a party made up of former members of the UDF); Bulgarian People's Union (BPU; a centre-right grouping, most of whose members were previously in the UDF); Ataka (Attack; a nationalist grouping that emerged just before the parliamentary election in June 2005); Citizens for European Development of Bulgaria (CEDB; led by Boiko Borisov, a former mayor of the capital, Sofia); Napred is a coalition of three parties: the Internal Macedonian Revolutionary Organisation-Bulgarian National Movement (VMRO-BND), the Liberal Initiative for Democratic European Development (LIDER) and the Agricultural National Alliance (ZNS); Law, Justice and Order Party (LJO)

    Council of ministers

    Prime minister: Marin Raykov

    Deputy prime minister & labour minister: Deyana Kostadinova

    Deputy prime minister & EU funds minister: Iliyana Tsanova

    Deputy prime minister & regional development minister: Ekaterina Zaharieva

    Key ministers

    Agriculture & food: Ivan Stankov

    Culture: Vladimir Penev

    Defence: Todor Tagarev

    Economy, energy & tourism: Assen Vassilev

    Education, youth & science: Nikolay Miloshev

    E-government: Roman Vasilev

    Environment & water: Yulian Popov

    Finance: Kalin Hristov

    Foreign: Marin Raykoc

    Health: Nikolay Petrov

    Interior: Petya Parvanova

    Justice: Dragomir Yordanov

    Sport: Petar Stoychev

    Transport, communication & IT: Christian Krastev

    Central bank governor

    Ivan Iskrov

    March 28, 2013

  • Outlook

    Bulgaria: Key developments

    Outlook for 2013-17

    • The outcome of the pre-term parliamentary election called for May 12th is highly uncertain.
    • There may be a prolonged period of post-election political haggling before a coalition government is formed.
    • The EU will keep Bulgaria under close scrutiny, continuing to demand judicial reform and greater efforts to combat corruption and crime.
    • The new government, whatever its political complexion, will not jeopardise the policy anchor provided by the currency board.
    • Nevertheless, The Economist Intelligence Unit expects a post-election shift in emphasis towards policies aiming to increase employment and boost growth.
    • We forecast real GDP growth of 1.3% in 2013, following a growth slowdown to 0.8% in 2012.
    • Growth is forecast to accelerate to an annual average of 3.3% in 2014-17 as labour and credit markets rebound. There are downside risks to this forecast, owing to the uncertain outlook for the euro zone.
    • We forecast that average inflation, which slowed to 3% in 2012 from 4.2% in 2011, will pick up modestly to an annual average of 3.4% in 2013-17.
    • The current-account deficit, estimated at 1% of GDP in 2012, is forecast to widen modestly in 2013-17, to an average of 3.3% of GDP per year, as a result of the new government's pro-growth policies.

    Review

    • Mass protests against energy bills led the government to announce on February 19th that it was revoking the licence of the largest foreign-owned electricity distributor, CEZ (Czech Republic).
    • Protests nonetheless continued, and turned violent, and the CEDB government led by Boiko Borisov resigned on February 20th.
    • All parliamentary parties refused to accept the mandate to form a government, forcing the formation of a caretaker government and early elections.
    • On March 13th the president, Rosen Plevneliev, dissolved parliament and appointed a caretaker government to govern until the formation of a regular government after elections on May 12th.
    • There was a large expansion of the budget deficit in January, as a result of a decline in tax receipts.
    • Real GDP growth slowed to 0.8% year on year in 2012, from 1.9% in 2011.

    March 28, 2013

Economy:

  • Background

    Bulgaria: Country fact sheet

    Fact sheet

    Annual data2012aHistorical averages (%)2008-12
    Population (m)7.3Population growth-0.7
    GDP (US$ bn; market exchange rate)51.0bReal GDP growth0.6
    GDP (US$ bn; purchasing power parity)97.8bReal domestic demand growth-1.6
    GDP per head (US$; market exchange rate)6,976Inflation4.9
    GDP per head (US$; purchasing power parity)13,390Current-account balance (% of GDP)-6.6
    Exchange rate (av) :US$1.52bFDI inflows (% of GDP)7.3
    a Economist Intelligence Unit estimates. b Actual.

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    Background: After a violent communist takeover, Bulgaria became a People's Republic in 1947. The communist regime collapsed in November 1989, but the Bulgarian Communist Party-renamed the Bulgarian Socialist Party (BSP)-won the country's first free election. The anti-communist Union of Democratic Forces (UDF) formed a government after the election in October 1991, but was replaced in December 1992 by a technocratic government backed by the BSP and the mainly ethnic Turkish Movement for Rights and Freedoms (MRF). The election in December 1994 returned the BSP to power, but a severe economic crisis in 1996-97 forced an early election in April 1997, which a UDF-led centre-right coalition won. The Simeon II National Movement (SNM, which has since changed its name to the National Movement for Stability and Progress/NMSP) won the election in 2001 and governed with the MRF until the election in June 2005. The BSP won the election in 2005 and governed with the NMSP and the MRF until the election in July 2009, after which the centre-right Citizens for European Development of Bulgaria (CEDB) formed a minority government. The CEDB government resigned on February 20th 2013 following mass protests, giving way to a caretaker government pending elections on May 12th.

    Political structure: Bulgaria has a unicameral legislature. The 240-member National Assembly is constitutionally the highest state authority. Its members are elected by proportional representation. A new constitution was passed in July 1991. The head of state is a directly elected non-executive president, who has the power to delay legislation, but not to block it.

    Policy issues: Following the economic crash in 1996-97, an IMF-backed currency board was introduced. The currency board is intended to remain in place until Bulgaria adopts the euro (which is unlikely before 2015). The currency board limits monetary policy, and so fiscal policy will remain crucial for macroeconomic stability. Further reform of the judiciary, and intensified efforts to combat corruption and organised crime, will be needed if Bulgaria is to avoid any further imposition of punitive restrictions on its use of EU funding.

    Taxation: There is a flat-tax system in place, with a single, 10% rate applied on personal income since January 2008, and a 10% rate applied on company profits since January 2007. Value-added tax (VAT) is levied at a single rate of 20%, although tourism packages sold abroad carry a rate of 9%.

    Foreign trade: In 2011 exports of goods (fob) amounted to US$28.1bn and imports of goods (fob) amounted to US$30.9bn. The current-account surplus was around US$500m (0.9% of GDP), having swung from a deficit of 1.2% of GDP in 2010.

    Major exports 2011% of totalMajor imports 2011% of total
    Other metals12.4Crude oil & natural gas17.1
    Clothing & footwear7.5Machinery & equipment7.0
    Iron & steel4.4Chemicals, plastics & rubber7.0
    Chemicals, plastics & rubber4.1Textiles4.8
        
    Leading markets 2011% of totalLeading suppliers 2011% of total
    Germany11.9Russia18.3
    Romania9.6Germany11.2
    Italy8.3Italy7.4
    Turkey8.0Romania7.1

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    March 28, 2013

  • Structure

    Bulgaria: Economic structure

    Data and charts: Annual trends charts


    March 28, 2013

  • Outlook

    Bulgaria: Country outlook

    Bulgaria: Country outlook

    FROM THE ECONOMIST INTELLIGENCE UNIT

    POLITICAL STABILITY: Bulgaria has entered a period of political uncertainty after mass protests led to the resignation of the centre-right Citizens for European Development of Bulgaria (CEDB) government and the appointment of a caretaker administration, which will govern until pre-term parliamentary elections on May 12th. The prime minister, Boiko Borisov, submitted his resignation on February 20th, following several days of mass protests, some of which turned violent. The demonstrations were sparked by higher electricity bills, but quickly transformed into generalised protests against the government, much like those in Romania a year earlier. There, too, protests sparked by a specific issue (health service reforms) became the focus for broader anti-government protests over austerity and corruption, resulting in the collapse of the centre-right government. However, unlike in Romania, where a ready-made centre-left coalition was ready to step in and form an interim government (pending scheduled elections six months later), none of the parliamentary parties in Bulgaria, including the Bulgarian Socialist Party (BSP), was prepared to form a government. This has forced the holding of early parliamentary elections (the scheduled poll was due in July 2013). The outcome of the election is uncertain and a prolonged period of political bargaining may follow, possibly resulting in the formation of an unstable coalition.

    ELECTION WATCH: Recent events have conspired to move the date of the next general election, which had been scheduled for July 7th 2013, and a pre-term poll will be held on May 12th.

    INTERNATIONAL RELATIONS: The EU will continue to monitor Bulgaria closely and may impose penalties if the country fails to meet its commitments. The latest report by the European Commission, published in July 2012, pointed to continuing shortcomings, including a lack of convictions in cases of organised crime, and concern about the management of the judiciary. To give Bulgaria more time to make progress in these areas, the Commission said that instead of publishing regular six-monthly reports, the next report on Bulgaria will not be issued until the end of 2013. Although the country's problems are widespread and entrenched, The Economist Intelligence Unit expects some progress in 2013-17, including an improvement in the absorption of EU funds. Bulgaria has met the technical requirements for joining the Schengen area, but political opposition within the EU means that entry will be delayed until mid-2013 at the earliest.

    POLICY TRENDS: Pending the May 12th elections the caretaker administration will have to deal with urgent matters such as overseeing several large infrastructure projects, distributing EU cohesion funds for 2014-20 and managing the state finances. In practice, the interim government is unlikely to be office long enough to leave an imprint on policy. However, the coalition government that comes to power after the May 12th general election, whatever its political make-up, is likely to preside over a change of policy emphasis, if not a complete overhaul. It is likely to put more emphasis on tackling unemployment and promoting growth, without jeopardising the country's prized fiscal stability. The government is unlikely to pursue nationalisation, as demanded by some protesters, but will focus on increasing competition and improving the business environment to attract investors.

    ECONOMIC GROWTH: Recovery from the recession of 2009 has been slow, with real GDP growth averaging 1% per year in 2010-12. In 2012 growth slowed to 0.8% year on year, from 1.9% in 2011, as faltering economic activity in the euro zone, Bulgaria's main trade partner, caused export performance to weaken. With the outlook for the euro zone remaining gloomy, and a domestic political crisis compounding investor uncertainty, we forecast that growth will be modest in 2013, at 1.3% (previously 1.5%). We expect a gradual acceleration in growth rates during 2014-17--driven by private consumption, fixed investment and exports--with real GDP growth accelerating to an annual average of 3.3%, which is still well below pre-crisis rates of around 6%.

    INFLATION: Average inflation slowed to 3% (according to national methodology) in 2012, from 4.2% in 2011, owing to a decline in international non-oil commodity prices and a weakening of the global economic recovery. Inflation was subdued in January-June 2012, at an average of 1.8% year on year. Although it rose to 4.1% in the second half of the year, driven by higher international food prices, we expect inflationary pressures to moderate in the coming months. However, tensions in the Middle East could lead to a spike in oil prices, which would be likely to push up inflation in Bulgaria.

    EXCHANGE RATES: The currency board arrangement still retains strong political commitment, and it is expected to stay in place until euro adoption (which is not expected in the forecast period), with the lev fixed to the euro at Lv1.95583:EUR1. Although the real effective exchange rate (REER) of the lev appreciated significantly in the pre-crisis years, it has depreciated since 2011, allaying concerns about economic competitiveness. The euro zone debt crisis has diminished the allure of joining the euro, and the government has become more circumspect about applying for entry into the EU's exchange-rate mechanism (ERM2), saying that it will not do so until the crisis is resolved.

    EXTERNAL SECTOR: The current-account surplus in 2011, of 0.9% of GDP--the first surplus since 1997--reflected strong export performance, supported by higher commodity prices. We estimate that the current account slipped back into a small deficit in 2012, with export performance weakening more markedly than import performance as the government pressed on with infrastructure projects ahead of the 2013 election. We forecast that relatively strong export growth will partly offset the increased demand for imports as economic growth accelerates in 2013-17, and that during this period the current-account deficit will average the equivalent of 3.3% of GDP per year.

    March 28, 2013

  • Forecast

    Bulgaria: Country forecast summary

    Country forecast overview: Highlights

    • Bulgaria has entered a period of political uncertainty, after mass protests led to the resignation of the centre-right Citizens for European Development of Bulgaria (CEDB) government and the appointment of a caretaker administration, which will govern until pre-term parliamentary elections on May 12th.
    • The outcome of the election is uncertain. The CEDB's chances of being re-elected have been dented, but its early resignation may give it a slim chance. A coalition will be needed to create a government-led by either the CEDB or the Bulgarian Socialist Party (BSP) and involving the Movement for Rights and Freedoms (MRF) and perhaps other smaller parties. Ataka is likely to enter parliament, but no other party would want to be in coalition with it.
    • The incoming government, whatever its political make-up, is likely to preside over a change of policy emphasis, if not a complete overhaul. It is likely to put more emphasis on tackling unemployment and promoting growth, without however jeopardising the country's prized fiscal stability.
    • The new government will not jeopardise the policy anchor provided by the currency board. Bulgaria is committed to adopting the euro, but entry into European economic and monetary union (EMU) will not take place until the euro zone debt crisis has been resolved.
    • After the early 2013 protests, there is likely to be some relaxation of fiscal policy. The Economist Intelligence Unit forecasts that after an election-related expansion to 1.2% of GDP in 2013, the budget deficit will narrow to an average of around 0.6% of GDP in 2014-17. Financial shortfalls in the healthcare sector, which strained the budget in 2011-12, present a risk.
    • Real GDP growth slowed to 0.8% in 2012, from 1.9% in 2011. We forecast that growth will accelerate to 1.3% in 2013 and an annual average of 3.3% in 2014-17. There are substantial downside risks, owing to the weakness of the recovery in the EU and the debt crisis in Cyprus, Greece and the wider euro zone, to which Bulgaria is extremely vulnerable.
    • We forecast that inflation will rise moderately in 2013-17, at an annual average of 3.4%, as domestic demand remains relatively subdued, given more cautious credit growth than in pre-crisis years and tighter government wage policy.
    • The current-account balance has improved sharply since 2009. We forecast that the deficit will remain relatively small, at an average of 3.3% per year in 2013-17.

    March 28, 2013

Country Briefing

Total area

111,002 sq km, of which 28% is arable land and 33% forest

Population

7.61m (December 2008)

Main cities

Population in '000 (December 2007) (a):

 Sofia (capital): 1,241

 Plovdiv: 705

 Varna: 460

 Burgas: 420

 Stara Zagora: 356

 Blagoevgrad: 329

 Pleven: 298

 Pazardzhik: 294

(a) Population figures relate to planning districts (oblasts) rather than cities.

Climate

Continental

Weather in Sofia (altitude 550 metres)

Hottest month, July, average temperature 21°C; coldest month, January, average temperature -2.3°C; driest month, April, 18 mm average rainfall; wettest month, June, 91 mm average rainfall

Language

Bulgarian

Weights and measures

Metric system

Currency

Lev (Lv) = 100 stotinki; the plural of lev is leva

Time

Two hours ahead of GMT in winter; three hours ahead in summer

Fiscal year

Calendar year

Public holidays

January 1st (New Year), March 3rd (Liberation Day), April 16th (Easter Monday), May 1st (Labour Day), May 6th (St George's Day), May 24th (Saints Cyril and Methodius), September 6th (Unification Day), September 22nd (Independence Day), November 1st (National Revival Day), December 24th-26th (Christmas)


January 07, 2013

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