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Bulgaria’s economy continues to grow
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Economic indicators for the Bulgarian economy paint a rosy picture for the country’s future. Gross domestic product (GDP) is growing by 6.4% compared to last year. [1]

Unemployment decreased across the country to 7%, which brings it almost level with the EU average of 6.8% [2]. The decrease is due to successful employment schemes and incentives and the growth in foreign firms opening up and relocating divisions to Bulgaria to take advantage of the country‘s cheap labour and high skill level. Since 2002, more than 400,000 jobs have been created.

Salaries still remain low, with the national minimum wage set at 220 Leva a month and a potential wave of strikes seems imminent following the teacher’s strike. This year, the government expect a budget surplus of 2.5%, which means they will have more to give away in the form of tax cuts and salary increases. [3] Old age pensioners have also received two 10% increases on their state pension this year.

So far, the government have declared a 10% flat rate of from January 2008, which makes Bulgaria an even more attractive option for foreign investment. The Economist Intelligence Unit (EIU) survey “World investment prospects to 2011”, predicts that the level of foreign direct investment (FDI) in Bulgaria will be around $2.3-2.5 billion during 2007 to 2011. FDI was a staggering $5.2 billion by the end of 2006 and this accounted for 16.4 % of the GDP, which is far higher than that of it‘s neighbours. If Bulgaria reaches the predicted FDI level, it will rank in ninth place in the world rankings.  Last year Bulgaria doubled its investment compared to 2005. In 2006, 286 projects were started in the country, bringing it to tenth place in the world ranking. The only Eastern European countries to outrank it were Russia, Romania and Poland.

Inflation is the government’s biggest worry in this healthy economy. Consumer prices rose this summer and the Bulgarian utility prices regulator DKEVR suggested a 9% increase in the price of natural gas from October 2007. Yet, Finance Minister, Plamen Oresharski, believes inflation is not a problem for the overall economy. He put the recent increase down to the poor grain harvest brought on by the drought and rising household consumption and doesn’t expect inflation to continue rising for the rest of the year.

It is likely that the government will not meet its annual inflation target of 3.1% this year and the target will be reset for 2008. Inflation is the only economic area where Bulgaria fails to meet the EU’s targets for adopting the Euro.

Consumer spending increased, indicating that Bulgarians have more money. More people are taking advantage of the new mortgage liberalisations laws and more are taking on credit loans to fund large purchases. The mortgage market in 2006 was worth 1.8 billion Euros and it is expected to increase to 3.8 billion euros by 2009 [4].

On September 24th, the World Bank released a report on the challenges faced by Bulgaria in terms of increasing productivity. It reported that Bulgaria’s economic activity had increased to 65 %, which put it above Hungary, Poland and Romania. The World Bank said that Bulgaria would have to intensify productivity growth by 5% a year to reach the income levels of other EU member states. World Bank director for South Central Europe, Anand Seth, believes that high growth was possible.

Healthy economic indicators coupled with Bulgaria’s political stability and EU membership are likely to have a positive effect on property prices, particularly in the cities, where the demand for labour is increasing.  According to estate agents in Bulgaria expect increases of 10%. As the population becomes wealthier prices for cheaper apartments are expected to see the largest increases. Valeri Leviev Elta Konsult claimed that apartments in the dowdy former communist panel blocks and older brick buildings on the outskirts of the cities would also increase by 10%.
Real estate in Bulgaria was still lower than that in most Central and East European countries, making it still an attractive investment option for foreigners.

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