Economy of Bulgaria
The economy of Bulgaria functions on the principles of the free market, having a large private sector and a smaller public one. Bulgaria is a developing, industrialised, high-income country according to the World Bank, and is a member of the European Union, the World Trade Organization, the Organization for Security and Co-operation in Europe and the Organization of the Black Sea Economic Cooperation. The Bulgarian economy has experienced significant growth, starting from $13.15 billion and reaching estimated gross domestic product of $107 billion or $229 billion, GDP per capita of $36,000, average gross monthly salary of 2,468 leva , and average net monthly salary of $2,191 . The national currency was the lev, pegged to the euro at 1.95583 leva for 1 euro. The lev was the strongest and most stable currency in Eastern Europe. On January 1st, 2026, Bulgaria adopted the euro.
The strongest sectors in the economy are energy, mining, metallurgy, machine building, agriculture and tourism. Primary industrial exports are clothing, iron and steel, machinery and refined fuels.
Sofia is the capital and economic heart of Bulgaria and home to most major Bulgarian and international companies operating in the country, as well as the Bulgarian National Bank and the Bulgarian Stock Exchange. Varna is the third largest city in Bulgaria and the largest city on the Black Sea in Bulgaria.
The Bulgarian economy has developed significantly in the last 26 years, despite difficulties following the disbandment of Comecon in 1991. In the early 1990s, the country's slow pace of privatization, contradictory government tax and investment policies, and bureaucratic red tape kept foreign direct investment among the lowest in the region. Total FDI from 1991 through 1996 was $831 million.
In December 1996, Bulgaria joined the World Trade Organization. In the years since 1997, Bulgaria has begun to attract substantial foreign investment. In 2004 alone, over 2.72 billion euro were invested by foreign companies. In 2005, economists observed a slowdown to about 1.8 billion euro in FDI, which is attributed mainly to the end of the privatization of the major state-owned companies.
After joining the European Union in 2007, Bulgaria registered a peak in foreign investment of about 6 billion euro.
Low productivity and competitiveness on the European and world markets alike due to inadequate R&D funding, however, still remain a significant obstacle to foreign investment.
Nevertheless, according to the latest Annual report of the Economic Research Institute at the Bulgarian Academy of Sciences, the average salary in Bulgaria is a quarter of the average salary in the European Union, and should be two times higher when labour productivity is factored into the formula.
During the Great Recession, Bulgaria saw its economy decline by 5.5% in 2009, but quickly restored positive growth levels to 0.2% in 2010, in contrast to other Balkan countries. However, growth remained weak in the following years, and GDP only reached pre-crisis levels in 2014.
History
During the 17th and 18th century Bulgaria had a largely undeveloped industry with agriculture, crafts, and partly trade being the only developed industry sectors.Bulgaria was one of the more dynamic industrial areas of the Ottoman Empire. Bulgaria experienced an economic boom in export-oriented textiles in the period 1815–65, even while the Ottoman Empire's economy was declining. Bulgaria had comparatively weak economic growth from the 1870s to World War I. The Bulgarian export sector collapsed after Bulgarian independence in 1878. By 1903, industrial output in Bulgaria was far lower than in 1870.
Interwar Bulgaria was characterized by extensive government intervention in the economy. During the period 1921-1925, approximately 100,000 Bulgarians were forced into a system of compulsory labor where they worked for the government on public works for eight months without pay.
During the 1930s, the Bulgarian economy was described as an economy militarily bound to Germany. In the early 1940s, as Germany began to lose the Second World War, the Bulgarian economy suffered a decline.
In the interwar period, there was considerable economic modernization in Bulgaria's agricultural sector, setting the conditions for rapid growth after World War II.
Cold War period
During the Socialism era, Bulgarian economy continued to be industrialized, although free market trade substantially decreased, as private market initiatives became state-regulated. Still, the Bulgarian economy made significant overall progress in modernizing road infrastructure, airline transportation, as well as developing the tourism sector by building tourist resorts along the Black Sea coast and the mountain regions.From the end of World War II until the widespread change of regime in Eastern Europe in November 1989, the Bulgarian Communist Party exerted complete economic, social and political control in Bulgaria. The party's ascent to power in 1944 had marked the beginning of economic change towards planned economy. During that time, Bulgaria followed the Soviet model of economic development more closely than any other member of the Eastern Bloc, while becoming one of the first members of Comecon. The new regime shifted the economy type from a predominantly agrarian one towards an industrial economy, while encouraging the relocation of the labour force from the countryside to the cities, thus providing workers for the newly built large-scale industrial complexes. At the same time, the focus of Bulgarian international trade shifted from Central Europe to Eastern Europe and the USSR.
These new policies resulted in impressive initial rates of economic development. Bulgarian economy closely resembled that of the Soviet Union. Soviet-style centralised planning formed by consecutive five-year plan periods had more immediate benefits there compared to the other Eastern European states where it was first applied in the early 1950s. Throughout the postwar period, economic progress was also substantially assisted by a level of internal political stability unseen in other Eastern European countries during the same period. That represented a change on the Bulgarian political scene, as political turbulence was common before BCP's ascent to power.
Nonetheless, beginning in the early 1960s, low capital and labour productivity, as well as expensive material inputs, plagued the Bulgarian economy. With disappointing rates of growth came a high degree of economic experimentation. This experimentation took place within the socialist economic framework, although never approaching a market-based economy.
In the late 1980s, continuing poor economic performance intensified economic hardship. By that time, the misdirection and irrationality of BCP economic policies had become quite clear. Bulgaria's economy contracted dramatically after 1987, shortly before Comecon, with which the Bulgarian economy had integrated closely, dissolved in 1991. On 10 November 1989, at the November plenum of BCP, Todor Zhivkov was dismissed from his long-held party leader and head of state positions. The communist regime gave way to democratic elections and government. Unlike the communist parties in most other Eastern European states, the BCP retained power by winning the first free national elections in June 1990. That was made possible by changes in party leadership, programme, reduction of its power base and other moves which permitted economic re-orientation toward a market system. This difficult transition combined with political vagueness and unpreparedness of the Bulgarian people for social and economic changes led to dramatically worsening economic conditions during the early 1990s.
1990–2000
Economic performance declined dramatically at the beginning of the 1990s after the disbandment of the Comecon system and the loss of the Soviet and Comecon market, to which the country had been entirely tied. Also, as a result of political unrest with the first attempts to re-establish a democratic political system and free market economy the standard of living fell by about 40%, and only started to stabilize significantly after 1998 after the fall of Jean Videnov's socialist government. It regained pre-1989 levels by June 2004.First signs of recovery showed in 1994 when GDP grew by 1.4%. This progress continued with a 2.5% rise in 1995. Inflation, which surged to 122% in 1994, fell to normal rates of 32.9% in 1995. During 1996, however, the economy collapsed during Jean Videnov's government. That was due to the Bulgarian Socialist Party's inability to introduce vital economic reforms and failure to set legislative standards for banking and financial institutions, thus forcing an unstable banking system. All this led to an inflation rate of 311%, and the collapse of the lev. In the spring 1997, the pro-reform United Democratic Forces coalition came to power with its ambitious economic reform package. The reforms included introduction of a currency board regime, which was agreed to with the International Monetary Fund and the World Bank, and allowed the economy to stabilize. The 2000s saw a steady pace of growth and budget surpluses, but shaky inflation.
Successful foreign direct investment and successive governments have demonstrated a commitment to economic reforms and responsible fiscal planning that have contributed greatly to the Bulgarian economy, with a historical growth rate average of 6% a year. Corruption in the public administration and a weak judiciary have continued to be long-term problems, with presence of organized crime remaining very high.
Although politicians were giving warranties that the late-2000s recession would not hit Bulgaria, the economy suffered a 5.5% GDP decline in that period. Unemployment rose for at least five-quarters bringing Bulgaria's worst recession since the early 1990s. Still, economic circumstances were not too severe when compared to the rest of Europe. Future prospects are tied to the country's increasingly important integration with the European Union member states.