Bulgaria’s Potential for Sustainable Growth and Shared Prosperity

After years of strong performance in the
run-up to the European Union (EU) accession, Bulgaria’s
growth has slowed down and poverty remains the highest in
the EU. Bulgaria achieved the highest recorded growth rates
between 2000-08 on the back of exceptionally high capital
inflows, structural reforms, sound fiscal management and the
prospects of EU accession. Employment boomed and poverty
fell steeply. Since 2008 – the year of global economic
crisis – economic growth has been sluggish, poverty on the
rise and income gains of the bottom 40 percent. Recently,
labor markets and poverty have shown some signs of respite
but new growth drivers and a sustained reform commitment
will be needed for the current generation of Bulgarians to
obtain EU living standards. This Systematic Country
Diagnostic (SCD) identifies three policy areas with the
potential to transform the economy and achieve this
objective: (1) strengthening the institutional and legal
framework for good governance; (2) boosting the skills and
employability5 of all Bulgarians; and (3) improving the
effectiveness and efficiency of public spending. Drawing on
an extensive body of previous and current work carried out
by the Bank, as well as local and foreign experts, the SCD
discusses drivers and constraints to growth and uses an
asset-based framework to understand how micro and
macro-economic forces shape the income profile and dynamics
of the bottom 40 percent of the population.