News

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.

(to be translated)

As we approach the end of each year, the minimum wage becomes a subject of dispute and political discourse once again. Popular ideas this year include raising it (to 780 BGN), raising it significantly (to 850 BGN), and a slightly newer proposal - making it 50% of the average wage in the country (around 870 BGN based on Q3 2022 data). In previous years, in addition to the mentioned proposals, there were more complex suggestions - setting it through a set of indicators, indexing it with others, making it different across regions, sectors, professions, and so on.

The National Revenue Agency (NRA) does not provide official statistics on the number of people working for the minimum wage, but according to government officials and parliamentary discussions, it amounts to around half a million people. Some of them receive additional cash payments (probably in the hotel industry, transportation, and construction), and raising the minimum wage will simply pour more money into the treasury and social security systems. Another part is employed by the state and municipalities (mainly in cleaning services), and wages there will need to be increased in any case. However, a third part actually receives only that much in the private sector, and employers will have to raise wages (including for other workers or at least those who earn slightly above the minimum wage) or reduce their workforce, or they too will resort to "under-the-table" payments.

For high-paying sectors, positions, and regions where the generated value-added is higher, none of the proposed increases will have a significant impact. However, the situation varies greatly in different parts of the country and in different industries.

Data for the third quarter of 2022 show that wages are lowest in the Kyustendil, Blagoevgrad, and Haskovo regions, where the current minimum wage is over 60% of the average wage. If the minimum wage is raised to 50% of the average wage for the country, its real share in these regions will increase to nearly 75% of the average wage. It is clear that some low-skilled workers will not remain employed, and more doors will be closed for the unemployed. At the same time, in the capital city - the region with the highest average wage - the share of the minimum wage will increase from 30% to 36%.

The situation is also significant in different sectors. In the hotel and restaurant, water supply and sewage, construction, and agriculture sectors, the share of the minimum wage is above 50%, reaching 66% in hotels and restaurants. If the minimum pay is raised to 50% of the average wage, its share in these sectors will be over 65% (up to 82% in hotels and restaurants). In the ICT sector, this increase will change the share of the MW from 17% to 21%.

If we only consider the payment of unskilled labor, we can see at least 80 thousand individuals in agriculture, wood processing, food and garment industries, construction, and various domestic, communal, and support services receiving an average of about 10% above the minimum wage in 2021. Additionally, we can add another 40 thousand individuals in the trade sector alone, who receive slightly over 20% above the minimum wage on average.

On the one hand, different sectors produce different value-added, concentrate workers with different qualifications, and have different labor organizations, which means significant differences in wages. On the other hand, the regional map shows a large gap between different regions. Naturally, we should strive for cohesion and high incomes for everyone, but in the name of populism, we cannot ignore reality.

The National Statistical Institute (NSI) publishes data from the population census regarding daily labor migration, which refers to the workplace location of employed individuals as of September 7, 2021. This snapshot of daily labor migration, obtained once every ten years, provides valuable information about economic processes in the country. Around 70% of the employed population in the country works in the same place where they live. However, nearly 500 thousand people work somewhere else, commuting daily to their workplace. They account for over 1/5 of all employed individuals in the country, and their movement gives a clear idea of the economic centers that attract workers. It should be noted that 121 thousand people, or a little over 5% of the employed population, work from home, which is also accounted for in the comprehensive census data.

Daily labor migration is particularly visible in the industry sector. Over half of the employed individuals in the mining industry commute to a different locality for work. This is understandable considering that mines in the country are located in small municipalities, such as in the Srednogorie region and Krumovgrad, where non-ferrous and precious metals are extracted, or in the coal-mining area of Radnevo. It is normal for these mines to attract many workers from neighboring areas. What's interesting in this case is that a large portion of this daily labor migration comes from a relatively close region - for example, around 85-90% of the staff at mining companies in the Srednogorie region come from municipalities in immediate proximity to the mine.

In manufacturing and construction, over 1/3 of workers commute to work outside their place of residence. This is also due to the specific nature of these two sectors, where large industrial facilities are often located on the outskirts of major cities, and construction generally involves labor migration toward large-scale infrastructure projects. The three main economic centers - Sofia, Plovdiv, and Varna - are examples of developed industries in peripheral municipalities that attract personnel, including from within the city itself. Regarding the industrial sector, the formation of significant economic centers in the country is evident, as they extend beyond administrative boundaries and shape the economic landscape of the country.

In the services sector, daily labor migration is much lower - less than 20% of workers in sectors such as education, healthcare, culture and sports, and administrative and professional activities commute to work outside their place of residence. Interestingly, in the field of information and communication technologies, less than 10% of employees commute to work outside their home municipality. The digital sector is heavily concentrated in the capital city, Sofia, and in some secondary centers such as Plovdiv and Varna, which suggests more permanent relocation rather than daily commuting to an office. At the same time, the digital sector stands out with the highest proportion of remote workers - over 1/3 of employees in the information and communication technologies sector work from home. In other service sectors such as professional and administrative activities, this percentage is within the range of 10-20%, while in all industrial sectors, it is practically negligible.

The regional breakdown of daily labor migration is also interesting. The highest share of workers commuting to a different locality is observed in Sofia (province) and Pernik. These two regions are closely linked to the capital city, Sofia, which undoubtedly attracts workers from neighboring areas. At the same time, both regions have an industrial character, including contributions from major companies in the Srednogorie region in Sofia Province, which explains the higher percentage of daily labor migration. The positive balance in the capital city is determined by the inflow of daily labor migration, which stands at nearly 58 thousand people. In Pernik, the negative balance due to daily labor migration is around 15 thousand people. In most other regions, the balance is within the range of 3-5 thousand people, with negative balances observed in Pazardzhik, Kyustendil, Vratsa, and Sliven, and positive balances in Plovdiv, Burgas, and Varna. The majority of daily labor migration occurs within the regions themselves. The National Statistical Institute will provide a breakdown by municipalities, including in the new analysis of economic centers in Bulgaria, which can already build upon the data from the latest census.