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The past years have been turbulent for the economies of the municipalities in the Burgas region. In 2020, they suffered one of the heaviest blows of the crisis nationwide. However, in 2021, they are experiencing rapid growth due to the recovery of tourism and the manufacturing industry. Among the main advantages of the region is its favorable demographic structure, but there are also visible challenges in terms of education, skills, and the quality of local school education.

• Rapid Recovery of the Burgas Economies

The year of the pandemic was particularly challenging for the local economies of Burgas in two aspects. On the one hand, there was a sharp decline in tourism and the disappearance of foreign visitors. On the other, there was a significant increase in uncertainty in demand for products from the manufacturing industry. In just one year, between 2019 and 2020, the Burgas region lost 17% of its gross domestic product per capita, placing it last in long-term economic growth among all 28 regions in the country. However, in 2021, the region achieved one of the fastest recoveries in the country, adding 4.4 thousand leva GDP per capita, reaching a total of 15.8 thousand leva per capita. Judging by the trends in tourism and the main industries of the region, we have every reason to believe that the positive trend in Burgas continued in the past year.

However, this by no means indicates that the levels of economic development or the pace of recovery within the region are uniform. Among the 13 municipalities that make up Burgas, the levels of economic development vary from 9.9 thousand leva per capita of added value in the non-financial sector in Burgas and 8.5 thousand leva per capita in Nesebar in 2021, to only 1.7 thousand leva per capita in Sungurlare and 1.9 thousand leva per capita in Aytos. In other words, the differences between the most developed and the least developed municipalities are almost 5 times.

In nominal terms, the largest local economy is that of the regional center, Burgas, with just over 2 billion leva, followed by the tourist center Nesebar (257 million leva) and Karnobat (150 million leva). In the year of rapid recovery, only two municipalities, Sungurlare and Karnobat, registered a decline in added value. However, Karnobat's contraction was minimal, at 4%, compared to a 24% decline in Sungurlare. The leading municipalities in terms of growth are Sredets (68% growth), Malko Tarnovo, Nesebar (both with 40% growth), and the municipality of Burgas itself (39% growth). The economic profile of the municipalities is diverse, with a focus on petroleum processing and the automotive industry in the manufacturing sector, but tourism also plays a significant role. The regional center, Burgas, is among the leaders in services and primary urban centers in the country.

• Investment Growth

After a significant slowdown during the pandemic year, the municipalities in Burgas are now experiencing widespread investment growth in the context of rapid recovery. Measured by the annual expenditure of companies on long-term tangible assets, the increase in investments is most evident in the small municipalities of Kameno (+96%) and Tsarevo (+97%). In almost all municipalities, investment growth on an annual basis is in the range of 30-50%, with the exception of the southern municipalities of Sozopol (12%) and Primorsko (no change), while in the regional center, expenses for land, buildings, and machinery are increasing by 41%. As expected, investment expenditures are concentrated in the largest local economy, the regional center, where investments worth 796 million leva were realized in 2021. In Nesebar, 129 million leva were invested, in Pomorie - 73 million leva, and in Karnobat - 41 million leva. However, in the other municipalities, the size of investments is relatively small, in the range of 15-20 million leva. When considered per capita, the most intensive investment activity is observed in Nesebar, with 4.3 thousand leva expenditure on tangible assets per person, as well as in Burgas - 3.9 thousand leva.

Against the backdrop of significant expenditures realized throughout the year in most municipalities, the total volume of foreign investments remains relatively unchanged. As expected, Burgas is also a leader in this regard, with just over 2 billion euros of foreign direct investment (FDI), or 9.9 thousand euros per capita. However, there is a slight decline in FDI in the municipality compared to 2020. There is a more significant presence of foreign capital in Nesebar - 113 million euros, as well as in Karnobat - 33 million euros. A significant positive trend is observed in Primorsko, with a 32% growth over the year, although from a very low base. Several municipalities in the Burgas region are among the leaders in the country in terms of utilizing funds from European funds, with Primorsko and Sozopol exceeding 5 thousand leva per capita, and Pomorie - 4 thousand leva. However, a significant portion of these European investments date back to the earliest program periods when the coastal towns were developing water treatment plants for drinking water and comprehensive water cycles.

• The Rise of the Labor Market

The economic growth of 2021 naturally leads to the recovery of the labor markets in the municipalities of Burgas. The only exception where the share of employed individuals among the population aged 15 and over was higher in 2020 is Karnobat, with a very small difference of 0.1 percentage points, reaching 33.6%. Sozopol remains unchanged. Nesebar registers a significant increase of over 3 percentage points, reaching 45.2%, due to the recovery of tourism. However, it should be noted that the employed individuals in Nesebar likely include a significant number of migrant workers from neighboring municipalities. The employment rate in Burgas is also high at 39.1%, but the increase compared to the previous year is not particularly significant. In half of the municipalities in the Burgas region, the employment rate is below 20%.

The increase in employment and the creation of new jobs is accompanied by a natural decrease in unemployment in the municipalities within the Burgas region. The fastest decline, by 4.4 percentage points, is observed in Ruen, as well as in Pomorie (3.2 percentage points) and Sozopol (3 percentage points). The only municipality that experienced an increase in unemployment in 2021 compared to the previous year is Sredets. Compared to the rest of the country, the municipalities in Burgas are characterized by relatively low unemployment rates, with only Sungurlare and Sredets exceeding 10%. In the regional center, the unemployment rate is already below 4%. Most municipalities have unemployment rates ranging from 4% to 6%, indicating a well-functioning local labor market.

In the year of the population census, we also have information about overall employment in the municipalities. The distribution is similar to that of the employed individuals, with the regional center Burgas leading at 53% of the population aged 15 and over, followed by Nesebar with 50%, Primorsko with 47%, and Pomorie with 44%. The lowest employment rates are found in Sungurlare (32%), Malko Tarnovo, and Sredets (both around 34%), but compared to other small peripheral municipalities, their performance is relatively good. As expected, the regional labor market in the regional center is the largest, with the census indicating 88 thousand employed individuals in 2021. All other municipalities have fewer than 10 thousand workers, with Nesebar (9.8 thousand) and Pomorie (9.4 thousand) having the highest number of employees among the peripheral municipalities, while the lowest number is in Malko Tarnovo, with only 777 individuals.

Despite the good performance of the local labor markets, wages in the municipalities of Burgas remain low. Three municipalities - Tsarevo, Primorsko, and Ruen - have average gross monthly salaries below 1000 leva in 2021. The highest salaries are found in the municipality of Burgas - 1360 leva per month, but they still lag behind other leading economic centers. The salaries in the other municipalities range from 1000 to 1200 leva per month. One possible explanation for the statistically low wages could be the dominant role of the hotel and restaurant sector in many of the municipalities.

• Educational Challenges

The census allows us to examine the educational structure of the population at the municipal level, which is directly linked to the potential for local economic development and attractiveness for investments. Over 20% of the population aged seven and above in Nesebar (24%) and Burgas (32%) have higher education. As expected, considering the age segmentation of the census data, the dominant group in most municipalities is individuals with secondary education, with the highest share in Nesebar and Primorsko (around 51%), while in most municipalities, it ranges from 45% to 50%. However, in some of the smallest municipalities, people with primary and lower education levels constitute the largest share - in Ruen, they account for as much as 63%, and in Sungurlare, it's 56%. Illiteracy is also a visible problem, with Malko Tarnovo, Sungurlare, and Sredets having illiteracy rates of around 5% among the population aged nine and above, while only in Nesebar and Burgas, illiteracy is below 1%. As a result, the region has one of the most unfavorable educational structures in the country. This largely limits the potential for development in small and remote municipalities in terms of the skills of the workforce.

Similar conclusions can be drawn from the results of exams conducted at different stages of school education. In the latest edition of the Bulgarian language and literature high school graduation exam, only the municipality of Burgas achieved an average score above "Good" (4), while almost half of the municipalities - Sungurlare, Kameno, Sozopol, Sredets, Malko Tarnovo - had an average score below "Average" (3). This indicates serious problems in the local educational system of small municipalities to provide even basic literacy skills to many of their students.

• The Demographic Advantage

Against the backdrop of extremely negative demographic processes in almost the entire country, the municipalities of Burgas achieve relatively good results. The region is home to one of the five municipalities in the country that experienced population growth between the 2011 and 2021 censuses - Nesebar, which with a growth rate of 6.3% over the decade, ranks second out of the 265 municipalities in the country, following Bozhurishte. Sozopol also achieves a relatively good result, with a population decline of 5%, as well as Primorsko (-7.4%) and the regional center (-7.7%), which are among the better results among the large cities in the country. The fastest population decline occurs in the border municipality of Malko Tarnovo, where the decline is nearly one-third within the decade, but all others remain below a 20% decline. The municipalities in Burgas also fare relatively well in terms of aging, with only Malko Tarnovo having a share of people over 65 years old exceeding 30% of the total population, while in the regional center, it is 21%.

The positive demographic dynamics are a direct result of the migration and natural processes in the municipalities. The balance between mortality and birth rates is negative everywhere, but the values are among the more favorable in the country - around 7‰ for 2021 in Nesebar and Ruen, 8‰ in Burgas, and significantly lower only in Malko Tarnovo (-30‰). Migration processes play a major role in the Burgas region, and as a result, in the past year, Nesebar increased its population by almost 4%, and Primorsko and Tsarevo by 3.3% each. The regional center also enjoys a positive migration balance of 0.6% for 2021, following the outflow of population characteristics for all major cities in 2020.

Author: Adrian Nikolov

The regions of Lovech and Pleven suffer from typical problems of Northwestern Bulgaria, including an aging and decreasing population, relatively weak investment activity, and a deteriorating educational structure. However, there are positive examples of rising economic development in some of the small municipalities in both regions in recent years.

• Large economic disparities

As is typical of Northern Bulgaria, the provinces of Pleven and Lovech include municipalities with significant differences in levels of economic development. Although economic activity is relatively high in some of them, most indicators are far from satisfactory. In Pleven, the municipality with the highest value added per person is Knezha – BGN 25,000 per person in 2021, or over three times more than the regional center Pleven, which registers BGN 6,500 per person. The main reason for this is the dynamics of international markets for agricultural products, particularly plant oils, which dominate the economy of the small municipality. In addition to these, municipalities such as Cherven Bryag and Dolna Mitropolia (BGN 4,400 per person) and Dolni Dabnik (BGN 4,000 per person) also have relatively high levels of development. In absolute terms, the largest economy is in the regional center Pleven – BGN 740 million, followed by Knezha (BGN 291 million) and Cherven Bryag – BGN 104 million. Knezha shows a visible upward trend compared to 2020, with value-added increasing by 75%, and Levski experiencing a significant growth of 88%. Cherven Bryag also has a modest growth (10%) due to local production and export recovery, but other municipalities in Pleven lose value added in 2021, despite the rapid overall growth in the country.

The economic structure of Lovech is similar, with Letnitsa (BGN 12,000 per person) and Troyan (BGN 7,400 per person) being the leaders in 2021, while the regional center Lovech has BGN 6,000 per person. In both leading small municipalities, the driving force of the local economy comes from the manufacturing industry. In Letnitsa, sports goods are leading, while textiles, pharmaceuticals, and wood processing take the forefront in Troyan. In nominal terms, the highest value added is in the regional center Lovech – BGN 245 million, but Troyan is close behind with BGN 209 million in 2021, with no other municipality having a local economy volume exceeding BGN 50 million. However, unlike Pleven, most municipalities in the Lovech region registered growth in value added in 2021. There are visible declines in Ugarchin (-40%) and Yablanitsa (-29%), while Apriltsi is the growth leader (20%), followed by the regional center (11%).

• Subdued Investment

With the lifting of restrictions and the normalization of economic life in the country in 2021, there is naturally an increase in investment activity in the non-financial sector in both regions. However, this does not mean that investment expenditures are evenly distributed among their various parts. In 2021, the leader in expenditures on long-term tangible assets in the Pleven region once again is the municipality of Knezha, with BGN 4.1 thousand per person in the population, followed by Belene (BGN 2.9 thousand per person) and the regional center (BGN 2.5 thousand per person). As expected, given the size of the local economies, the most investments were realized in the municipality of Pleven, with a value of BGN 289 million, as well as in Knezha - BGN 49 million and Cherven Bryag - BGN 25 million. Among the municipalities in the Lovech region, investment expenditures are lower in 2021, with Apriltsi leading with BGN 3.2 thousand per person, followed by Letnitsa and Troyan, with BGN 2 thousand per person. As Apriltsi registers over 500% growth on an annual basis, it is likely a one-time investment.

Regarding foreign investments, due to confidentiality, data is available for a relatively small number of municipalities in both regions. The leader here is Cherven Bryag with EUR 5.1 thousand per person in direct foreign investments (FDI), concentrated in the large lifting equipment plant in the municipality. In both regions, besides Cherven Bryag, only the municipality of Pleven has over a thousand euros per person. They are also the leaders in absolute values ​​- EUR 151 million FDI accumulated in Pleven and EUR 122 million in Cherven Bryag. Some municipalities perform well in the use of funds from European funds, with Troyan and Yablanitsa having over BGN 3 thousand per person, placing them among the leaders in the country.

• The recovery of the labor market

Following the general trend, all municipalities in both regions show visible improvements in the state of their local labor markets in 2021. The only municipalities where the share of employed persons among the population aged 15 and over has decreased in 2021 compared to 2020 are Pordim and Nikopol in the Pleven region, but the decrease there is symbolic. In most municipalities, the improvement is between 0.5 to 1 percentage point on an annual basis, and the most significant positive trend is in Cherven Bryag, where the increase is 2.1 percentage points. The differences in labor market activity within the regions are also significant - in Pleven region, the shares of employed persons range from 13% in Dolna Mitropolia to 40% in the regional center. The differences in Lovech are not as pronounced - between 18% employed in Teteven and 45% in Letnitsa, with the industrial municipality of Troyan performing better than the regional center here as well.

The positive dynamics are also evident in unemployment, with only Belene experiencing an increase in 2021 in Pleven, while Iskar (-6.1 percentage points) and Cherven Bryag (-5.7 percentage points) recover the fastest. None of the municipalities in Lovech register an increase in the unemployed, and the fastest decline is in Letnitsa (-6.8 percentage points). The differences between municipalities remain significant, with unemployment in the Pleven regional center at 6.7%, but in five of the small municipalities, it remains above 15%, and in Nikopol – as high as 26%. In Lovech, Troyan performs the best (7%), while Ugarchin (29%) performs the worst.

In the year of the population census, we have information about the overall employment in the municipalities. The distribution is similar to that of the employed - employment of the population aged 15 and over in the Lovech region is highest in the municipalities of Troyan (46%) and Lovech (42%), and lowest in Ugarchin (25%) and Letnitsa (27%), with the discrepancy in the latter being a result of high daily labor migration towards it. Employment in Pleven is significantly higher at 49%. Cherven Bryag and Belene also perform relatively well at 38% and 39% respectively. In absolute values, the largest labor market in the Pleven region is in the regional center with 48 thousand employed, as well as in Cherven Bryag (7.4 thousand employed) and Levski (4.8 thousand employed). In the other region, Lovetch municipality leads with 14.5 thousand employed, but Troyan, in second place, is relatively close with 11.1 thousand employed.

The different levels of economic development in the municipalities also contribute to the significant differences in wages among them. While in the leading municipalities in both regions - Letnitsa and Knezha - the gross monthly wages exceed 1600 leva, in some of the more lagging ones - Iskar, Teteven, Ugarchin - they have not yet reached 1000 leva. Among the regional centers, which concentrate employment, Lovech (1277 leva per month) performs better compared to Pleven (1240 leva per month).

• Educational Issues

The census allows us to examine the educational structure of the population at the municipal level, which is directly related to the potential for the development of local economies and the investment appeal. From the perspective of higher education in Pleven, there are no significant differences - all municipalities are located in the range of 9% to 15%, except for Pleven itself, where the share of individuals with higher education is 29% among the population aged seven and above. The differences are even smaller in secondary education, where in all municipalities except Nikopol, their share is between 50-57%. It is noteworthy that in Lovech, there are three municipalities - the regional center, Troyan, and Apriltsi - where the share of individuals with higher education is over 20% among the population aged seven and above, and in none of them is the share below 10%. Almost everywhere in both regions, except in the Lovech municipality, the share of people with primary and lower education is over 20%, but this mainly reflects the age range of the census data, which includes students in the breakdowns by education. Some municipalities also have a visible problem with literacy - the share of illiterate individuals is particularly high in Yablanitsa (9%), Letnitsa (4.5%), Ugarchin, and Lukovit (3%), which further limits the opportunities for labor market expansion in these areas.

From the perspective of school education, the results in both regions are low - in the high school graduation exams in Bulgarian language and literature, only the Lovech municipality approaches the national average values with an average grade of "Good" 4.17. Troyan and Pleven achieve a similar result of "Good" 3.85, but all other municipalities have grades close to "Average" 3.00. The results are similarly low in external assessments after the seventh grade.

• Demographic Challenges

Northwest Bulgaria is the region with the deepest demographic problems and rapid aging in the country, and the municipalities of Pleven and Lovech are no exception. However, within the regions, there are varying rates of population decline. While municipalities like Belene, Nikopol, and Pordim have lost approximately ¼ of their residents within a decade, those with the highest level of economic development experience a significantly lower decline. Examples of this are Letnitsa (4% decline over a decade) and Knezha (-6%). The regional center of Pleven has lost 14% of its population, and Lovech - 22%.

The factors driving the demographic dynamics in the municipalities of both regions are diverse. In the past two years, there is not a single municipality where the natural population growth is positive. In the weakest performing municipalities - Pordim, Nikopol, Gulyantsi, and Apriltsi, the coefficient approaches or even exceeds -30‰, and in most municipalities, it is beyond -20‰. The trends in mechanical population growth are more varied, with the reversal of migration trends in 2020 affecting small municipalities in Lovech and Pleven. Even here, the regional centers are losing population, but their periphery is experiencing significant growth, which continues in some cases (Apriltsi, Letnitsa) even in 2021.

It is also important to note that the Lovech and Pleven regions are among the significantly aging areas in the country, with some municipalities (Gulyantsi, Dolna Mitropolia, Iskar, Dolni Dabnik, Apriltsi, Ugarchin) having a share of people over 65 years old exceeding 30% of the population, and in most municipalities, it approaches this value. This limits further their development potential in terms of severely restricted access to the workforce.

Author: Adrian Nikolov

Sofia, February 27th 2023

Traditionally, since 2012, IME presented The study “Regional Profiles: Indicators for Development 2022”  

During the presentation, the following questions was discussed:

• How did the pandemic affect the regional map and what is the role of local authorities in the transformation of the economy?
• Has the gap between regions widened and what are the driving economic forces in different regions?
• The trends in employment, unemployment and income and why some areas lost ¼ of their population in a decade?
• Did the pandemic affect the results of the education system and how did the health system respond to the emergency?
• Local potential and what are the prospects for the regions?

 All analysis, data and other materials related to the research are published on the specialized website: https://www.regionalprofiles.bg/en/

• The data on municipal level from our sister projects:

https://265obshtini.bg/

https://dvenasto.bg/

• презентация от събитието (full presentation)

The project "Regional Profiles: Development Indicators" is implemented with the support of the “America for Bulgaria” Foundation

Today, the new "Economic and Investment Profile of Sofia" (2022) was published, prepared by the IME for the Sofia Investment Agency (SOIA). The profile shows the rapid development of Sofia after the pandemic, with the city's gross domestic product reaching over BGN 59 billion in 2021. Sofia contributes over half of the gross value added of services of the national economy, and in the digital sector, the city's share approaches 90%. One of the particularly interesting aspects of the new Sofia profile is the recovery of tourism and urban life after the pandemic.

Before the pandemic, tourism in Sofia was on the rise, with nearly 2 million realized overnight stays in accommodations in 2019, including over 1.4 million stays by foreigners. The pandemic and the strict restrictive measures severely affected tourism in the capital, with realized overnight stays shrinking to less than 800,000 for the entire year in 2020. The main decline came from foreign tourists, with only around 4,000-5,000 overnight stays by foreigners in Sofia in April and May 2020, compared to pre-pandemic levels of around 120,000-130,000 overnight stays by foreigners during the spring months. All of this hurt urban life, particularly in the tourism and entertainment sectors.

In 2021, as most restrictions gradually lifted and vaccines became available, tourist travel started growing, with nearly 1.2 million overnight stays recorded in Sofia. The recovery in tourist visits and overnight stays for Bulgarians is almost complete, while data for foreigners shows that international travel only partially recovered in 2021. Despite the overall economic recovery of the capital in 2021 and growth in almost all sectors, the slower recovery of tourist travel is one of the factors limiting the development and return to the usual dynamics of urban life before the pandemic.

In 2022, strong tourism growth can already be observed, with nearly 1.9 million overnight stays recorded in the first 11 months of the year, including 1.2 million stays by foreign citizens. In the second half of the year, the realized overnight stays in accommodations in Sofia surpassed the threshold of 200,000 stays per month, which is a record for the capital. In other words, although the impact of the pandemic on tourism in Sofia was evident for almost two years, in 2022, the tourist flow to the capital is fully restored and surpasses pre-crisis levels. This undoubtedly has a positive impact on Sofia, which is evident both in the dynamic urban environment and in optimistic data from sectors such as trade, transportation, hospitality and restaurants, culture, and sports.

Regional development in Bulgaria remains highly uneven, and the recovery from the COVID crisis in 2021 has reshuffled the ranking, especially among the least developed regions. This is evident from the published data on the gross domestic product (GDP) at the regional level by the National Statistical Institute (NSI) for 2021.

The economy of the capital city remains the largest among the regions in the country, accounting for 43% of the total GDP produced in Bulgaria, compared to 7.4% in Plovdiv and 6% in Varna. The economies of Vidin, Silistra, and Smolyan remain the smallest. In nominal terms, Sofia's GDP exceeds 59 billion leva, and Plovdiv is the only other region with a GDP exceeding 10 billion leva, although Varna is likely to join this group in the near future.

There are no particular surprises in the GDP per capita leaders. The capital city is at the top with over 45 thousand leva per capita, followed by Stara Zagora with 20 thousand leva per capita and Sofia Province with 19 thousand leva per capita. In 2021, the influence of the energy sector is especially visible, as it experiences significant growth in the favorable international market environment, thereby pushing up the levels of economic development in Stara Zagora and Vratsa – a process that continues in 2022.

However, what is more interesting is the distribution of regions with the lowest level of economic development, where the varying degree of recovery from the COVID crisis leads to significant reshuffling. Vidin, which has been the least developed region in terms of GDP per capita for a decade, now surpasses Haskovo, Silistra, Sliven, and Pernik. However, in practice, the differences are tiny – the 10 least developed regions have a GDP per capita ranging around 2 thousand leva, so it would not be surprising if there are further reshufflings in the coming years. We should also note that the data presented here do not yet consider the population census – and the reported additional population decline, especially in certain regions, will lead to an upward correction in the average GDP per capita.

Unlike the crisis year of 2020, in 2021, there is not a single region that does not exhibit economic growth. However, growth is also highly uneven – while Sofia adds 6.3 thousand leva GDP per capita, Haskovo and Kardzhali only grow by mere 600 leva per capita. Among the regions with the fastest recovery is Burgas, which adds 4.4 thousand leva per capita but the collapse of tourism in 2020 "erased" years of economic development, and its recovery will take more than a year.

Gross domestic product is by no means the only indicator viable for measuing and analyzing regional development. However, its dynamics in the year following the crisis clearly distinguish the regions with the most flexible local economies that can quickly recover from the impact of the coronavirus and restrictions and return to growth. Successful models of economic development are also evident – the rapid growth of services in the capital city, the energy centers of Stara Zagora and Vratsa, and the industrial economies of Sofia Province, Gabrovo, and Plovdiv.