The economic recovery in Europe has become more and more visible in the economy of Bulgaria too. The gross production in most districts increased in 2015, which has had a positive effect on living standards and conditions in them. For yet another year, however, parts of North-western and North-central Bulgaria have remained outside these positive trends such as the districts of Lovech, Razgrad and Silistra, as well as those of Sliven, Stara Zagora and Pernik, which have reported shrinkage or stagnation in their economies.
At the same time, the labor market upsurge and the increasingly acute shortage of workers were driving salaries up everywhere: this observation held true for all districts without exception in 2015. The rapid rise of the minimal salary (by an average of 9% in 2015), and the rise of minimum and maximum social insurance incomes (by 6 and 8% respectively) also contributed to the rise in declared incomes. Gross annual salaries grew by an average of about 7% in 2015, varying between 3 and 8% from one district to another. National average household incomes also grew in 2015–2016, though at district level there was more diversity: some districts reported rising incomes, others reported dropping incomes, still others reported repeated up and down fluctuations. This is due to the fact that salaries are but one component of household income as well as the statistical flaws characterizing sample surveys such as those about incomes.
Economic growth and the sustained rise in salaries, which in many districts implied higher household incomes, has reflected on living conditions as well. Although still being the country in the EU with the highest share of people living in material deprivation, Bulgaria registered an improvement of this indicator in 2016. If in 2014 about 34% of the population was living in material deprivation, in 2015 this share shrank to 32%. A fact worth noting is that there were only five districts where there was no drop in the number of people living in material deprivation: Veliko Tarnovo, Gabrovo, Kyustendil, Stara Zagora, and Yambol. Still, in terms of relative poverty, the share of people living below the national poverty line – the country could boast no improvement, nor could the greater number of individual districts. Despite the increasingly visible expansion of the economy, the share of the poor has remained relatively stable in the narrow interval between 21 and 23% in recent years.
The labor market recovery seems to have reached its peak by now, judging by the dynamics in 2016 indicators. The employment of the population in the most active age group (15 to 64) remained stable at the national level in the last two years – 63%. At the moment it has practically reached its pre-crisis peak levels – in 2008 its rate was 64%.
The further growth in employment will depend on the involvement of currently economically inactive persons and their (re)training, as well as on the reversal of the tendency towards net emigration and even importing workers from abroad. The connection between employment and qualification is visible at the district level: the larger the share of people with primary or lower education, the lower the employment in the district, and vice versa – a high share of university graduates goes hand in hand with a high employment rate.
As for the economic activity, in 2016 its dynamics went in the opposite direction. Though unemployment rates dropped, the reason was not the newly created jobs, but rather the population’s lower economic activity. In other words, some of the previously unemployed, who had actively been looking for jobs, were no longer on the labor market. Among the possible reasons for that was the rise in salaries after 2014 and the possibility for one breadwinner to provide for the family, the growing real estate market which meant greater income coming from property, as well as more opportunities for entrepreneurship (even if some were in the gray economy) as the economy was recovering. That last aspect is clearly seen in the data on operating non-financial enterprises in the country the number of which grew by almost 10,000 in 2016. The good news is that the number of enterprises increased in almost all districts, except Vidin and Lovech.
Apart from the availability of suitable workers, the further expansion of the economy will depend on its ability to attract foreign investments and generate local investments. Recent data show that investment in the country has been on the increase: cumulative foreign direct investment (FDI) with an increase of 1.6 b euro from its 2014 value as of the end of 2015. The greater part of new foreign investment was concentrated in the district of Burgas (a rise of 767 m euro compared to the end of 2014), where capital was invested primarily in new facilities in the Lukoil Neftochim refinery. The district of Sofia (capital city) ranked second in FDI growth in 2015 with an increase of 437 m euro. The districts of Varna, Dobrich, Plovdiv, Stara Zagora, and Haskovo also enjoyed some inflow of foreign investment. In fact, those were also the districts with the fastest development rates in the last couple of years, each hosting one or several economic branches with vigorous growth after the crisis: the IT industry, business services outsourcing, tourism, a number of manufacturing sub-branches (car parts, rubber and plastic, pharmaceuticals, machines and equipment etc.).
Alongside the inflow of foreign investment in most districts, the other main indicator of investment activity, Fixed Tangible Assets (FTA) expenditure, increased as well. Recent data show that those expenses were approaching an average of 3,000 BGN/person annually (2015).
It is not surprising that in Sofia they were almost twice the national average, whereas in some districts (Kardzhali, Kyustendil, Pernik, Sliven and Haskovo) they were less than half its size. It should be noted here that FTA expenditures also include capital expenditure by state and local government, hence they are strongly influenced by the utilization of EU funds. Obviously, in districts with a high rate of operational programs’ fund utilization FTA expenditure is also high. Examples in point are Gabrovo and Lovech, which have traditionally been among the leaders in sums paid to beneficiaries from operational programs.
Infrastructure is an important element of the investment environment. All other conditions equal, investors would prefer territories with good infrastructural connectivity, high quality roads and easy access to highways and first class roads, as well as transparent and up-to-date administrations. Unfortunately, despite considerable investment in road infrastructure due to accessible EU funds, the share of highways and first class roads has remained almost unchanged in the last 7 years, with a meager rise from 17.5% in 2009 to 18.6% in 2015. The same holds true for road surface quality in the last 5 years: the share of roads with good surface quality rose symbolically from 40.3% in 2012 to 41.5% in 2016. These observations lead to the conclusion that while new roads are being built and launched, including highways, investment in the maintenance of the existing road infrastructure is limited. The reason for this is that according to the terms of EU infrastructural funds the funding may be used for building new roads and parts of roads but not for the rehabilitation of old ones.
Varna, Stara Zagora, Shumen, and Plovdiv stand out among the districts with the best rating on infrastructure, whereas Kardzhali, Pleven and Smolyan are in the worst position. As relatively underdeveloped districts, the latter badly need infrastructural improvement and particularly increased investment in the construction of first class roads and highways so that they can get better positioning on Bulgaria’s investment map.
In 2017, local taxes and fees registered a continuing tendency for the tax burden to go up. 62 cases of raised rates were registered by IME in 2017, and only 8 cases of lowered rates. Altogether between 2013 and 2017 we registered 210 cases of raised and 50 cases of lowered taxes in the four main categories: the tax on the immovable property of legal entities, the vehicle tax, the property transfer tax, and the license tax for retailers. There may have been more cases of raised taxes, having in mind the fact that the requests for information were answered by about 75–80% of municipalities. The reasons for the increased taxes lie in the bad condition of municipal budgets in numerous municipalities and in the refusal to decentralize, which forces municipalities to raise local taxes and fees within their jurisdiction. Despite the common tendency for raising taxes, our observations have confirmed once again the relatively inconsiderable role played by them when people choose a municipality for business or resettlement.
Traditionally, local tax burdens have been higher in districts with relatively strong economies – Sofia, Varna, and Burgas, and lower in underdeveloped districts such as Vidin, Montana, Pernik, and Silistra. However, there are numerous exceptions to this rule: relatively developed districts like Stara Zagora and Gabrovo are characterized by low taxes and fees, while districts like Kardzhali and Razgrad – lagging behind in economic terms – have relatively high tax burdens. The reason for these “anomalies” can be found in the missing connection between local taxes and fees, on one hand, and decisions on setting up a business or relocating to a particular municipality, on the other. The inconsiderable role of taxes and fees is no news as payments constitute a relatively small part of the total tax burden both on business and individuals.
As far as administration is concerned, the best news is the quick increase in local authorities’ transparency, measured by the Active Transparency Rating of the Access to Information Program NGO. The national average rating went up from 49% in 2016 to 59% in 2017. Only three districts have registered a certain decline in their transparency ratings: Burgas, Sliven, and Sofia (capital city). At the same time, self-evaluation of local authorities on the development of electronic government and one-stop shop services has on the whole been in stagnation for years, and has only registered a symbolic improvement in 2017.
The coverage of the territory by cadaster maps, which is of paramount importance for investment and construction, has also been slow in progress, increasing from 20 to 23%. Only the districts of Sofia and Lovech have high cadastral map coverage (98 and 81%, respectively), whereas a number of relatively fast developing districts such as Plovdiv, Burgas, and Stara Zagora have less than 1/4 of their territory covered by cadastral maps. In some of the slow developing districts, such as Kardzhali, Pernik, Haskovo, Vidin, and Vratsa coverage is no more than 10%, which is an additional obstacle to investment in these districts.
The districts with the worst demographic conditions and tendencies are the districts with little investment, low employment, low salaries, and high unemployment. The districts of Vidin, Vratsa, Lovech, Kardzhali, and Kyustendil have for some time held the bottom positions in terms of population ageing and general demographic processes. Yet for another successive year this group was joined by the district of Gabrovo, which ranks immediately after the leader, Sofia (capital city), in overall economic development. Gabrovo had the most conspicuous population ageing despite its growing economy and having the second highest employment rate after the capital. The age dependency ratio, as a ratio between the population aged 65+ and that aged 0–14, is rather unfavorable in the district of Gabrovo: for each child there are 2.5 old age people, and for each person of working age (15–64) there are almost 0.5 old age people.
On the whole, demographic tendencies in the country have remained strongly negative though they were a little less extreme in 2016: natural growth went slightly up, though staying negative (–6‰), whereas the age dependency ratios deteriorated more slowly than they did in 2015. Still, the net outmigration increased in 2016 to reach –1.3‰. The districts which have been losing population fastest because of migration are Smolyan, Vidin, and Vratsa, while those which have been gaining from migration are fewer. In 2016, the latter’s number was reduced to the strong economic centers such as Sofia, Varna, Burgas, and Plovdiv. For yet another year the least favorable natural population fluctuation has been “reserved” for the districts of Vidin, Montana, Kyustendil, Gabrovo, Pernik, Lovech, and Vratsa which have two-digit negative natural growth rates.
The deteriorating demographic picture in the country has been a natural barrier to the Bulgarian economy’s growth potential. Real growth has failed to rise above 4% on an annual base for two and a half years, while recent analyses by the IMF and EC that include Bulgaria show that the economy is already working at its level of potential or close to it. The main reason behind is human capital or rather its deficiency. Along this line, the population’s education and qualification are of exceptional importance for the maximum utilization of this increasingly scarce resource. However, on the whole, university enrolment has been on the decrease – probably because of the smaller numbers of high school graduates, but also because of the worsening quality of university education and the fact that alternatives are sought abroad. In 2016, it was the main university centers such as Sofia, Veliko Tarnovo, Varna, Plovdiv and Blagoevgrad, that lost the greatest number of students. The number of school goers has also been on the decline: in this case, this is due to demographic reasons as well as the inability of the educational system first to enroll and then to keep children at risk in schools.
The net enrolment rate and the share of school dropouts remained relatively stable during the last year to reach 78% and 2.9% respectively in 2015. Dobrich is the district that failed both in enrolment (with an enrolment rate in first grade of only 68%) and in keeping children in school (with a share of dropouts of about 5%). The districts of Sliven and Pazardjik, despite having enrolment rates comparable with the national average, are the two other districts with a dropout rate of about 5%.
Municipal dropout data reveal an even more varied picture. In most municipalities (a total of 101) the share of dropouts is below 2%. There are, however, “clusters” of municipalities where the problem of school dropouts is much worse. In several small municipalities around Vidin and Vratsa, in almost all municipalities in the district of Dobrich, two municipalities south of Burgas and several close to Ruse, Plovdiv, and Stara Zagora, dropouts exceed 7–8% of students. The municipalities of Trun, Letnitsa, Venets, Hitrino, and Kostinbrod have performed even worse. A conspicuous factor which predetermines the share of dropouts is municipality size: large municipalities and district centers have performed better than small ones.
The quality of education, on the other hand, if we judge by the results from the mandatory matriculation examinations in Bulgarian language and literature, has widely varied. There are districts where over 20% of students failed at the exams and where grades were far below the national average of 4.22 in 2017: examples of this are Yambol and Kardzhali with average grades of 3.87 and 3.77 respectively. At the other extreme, apart from the traditional leader Sofia (capital city), the district of Smolyan stood out this year. The latter managed to rank first in overall education rating after determined efforts to improve the local educational system in recent years. Matriculation exam results in Smolyan were the second highest after the capital. The district registered the greatest increase in the number of teachers relative to the number of students which probably also contributed for the improved results.
The overall number of teachers in the country grew by slightly over 2,000 in 2016 with most districts registering an increase. Still, the correlation between the changed teacher-student ratio and the change in the matriculation exam average grade, though positive, is weak. It seems that a greater number of teachers in itself is not enough to trigger a serious change in the results of school education.
Both quality of life and healthcare are of particular importance for human capital locally. For another successive year the highest rating for local health care was held by Sofia (capital city), Pleven, and Gabrovo. Ensured access to doctors (including general practitioners and specialists) was improved in 2016 though in some districts – Razgrad, Targovishte, and Kardzhali – their shortage remained serious. Parallel to the increased number of doctors, there was an increase in the number of hospital beds in general hospitals – by over 3,000 in 2016, bed availability rising from 4.6 per 1,000 people a year earlier to 5.1 per 1,000 people. Nevertheless, the shortage of specialists and the insufficient hospital capacity in a number of districts forced local people to look for healthcare outside their district. Some of the districts with a relatively small number of hospitalizations in local hospitals were Veliko Tarnovo, Dobrich, Shumen, Yambol, Kardzhali, and Blagoevgrad.
Security and the efficiency of local courts are important elements of the social environment. Here, improvements are visible at the national level: crime rates (registered crimes against the person and property) have been falling, while clearance rates have been improving in most districts. As in the previous year, Sofia (capital city), Burgas, and Varna remained the districts with the highest crime rates and with low clearance rates, respectively. In the capital, less than 1/3 of registered crimes were detected, the national figure being almost 1/2. At the same time, the work of criminal sections in district courts grew more efficient.
Though judges’ workloads were a little higher in 2016, the share of pending cases decreased, while that of cases closed within 3 months went up. The capital was a bad example in administering speedy justice, too: the number of cases closed within 3 months was the lowest in the country here (79% compared to the national average of 89%), whereas the share of pending cases was the highest (13% compared to 8% nationally). The reason for this may be the overload of judges at the Sofia city court: a criminal judge sees 14 cases on average every month, while the national average is 9 cases per judge. Yet, there are examples of the opposite trend: high workloads do not impede justice speed in the districts of Plovdiv and Stara Zagora.
The environment is another significant influence on local social conditions. In this respect, the good news concerns mostly the population’s connectedness with sewerage systems which include wastewater treatment plants. In 2015, connectivity was already 62% com pared to 57% a year earlier thanks to the completion of a number of projects for the so called water cycles funded by EU funds. However, there are still some districts where the share of the population connected to wastewater treatment plants was below 10% despite the relatively high connectedness with sewerage. Those were the districts of Vidin, Silistra, and Yambol. In Silistra the wastewater treatment plant started operating recently which will be reflected in the 2016 data. In Vidin, work on the water cycle project was interrupted because of embezzlement signals and it still has to be renewed; in Yambol the project was delayed as well.
With the acceleration of economic growth and the growth of industry, increased air pollution was registered in the country in 2015. The district of Stara Zagora remained the leader in carbon dioxide emissions into the atmosphere; emissions increased by almost 1/5 in 2015 to reach 4,384 t/sq. km. Emissions in that district exceeded by over 4 times those in the district with the second most polluted air in the country – Sofia (capital city).
The sphere of culture was perhaps the one bringing more good news than any other in 2016. Because of the increased income and consumption, as well as the favorable results in the tourist industry, all monitored indicators for culture registered some improvement in 2016. Visits to the theatre as well as those to museums and libraries all grew in number. Sofia (capital city), Gabrovo, and Veliko Tarnovo could be named as the three cultural capitals of the country, all three districts standing out with a very high number of visits to culture places/events relative to the local population.