Bulgaria

V

Economy

Until 1947 Bulgaria was predominantly agricultural and rural, with virtually no heavy industry. In communist Bulgaria following World War II (1939-1945), all industrial enterprises were nationalized and operated under a series of five-year economic plans, with financial aid from the Soviet Union. Heavy industry was the government’s highest priority, and many Bulgarians moved from the countryside to cities to work in newly built factories. Bulgarian agriculture was organized into large collective farms (Collectivism), although many farmers were allowed to raise their own livestock and till small plots.

Bulgaria’s transition from a socialist to a market economy, which began in 1990, proved challenging. In 1991 the government introduced banking reforms, austerity measures, and a program to privatize state-owned assets. But the loss of the Soviet market for Bulgarian-produced goods triggered a pronounced economic contraction, causing widespread food and fuel shortages, high unemployment, and a severe drop in the standard of living. These developments led to popular dissatisfaction with the economic reforms. Consequently, the government failed to press for further reforms that would lead to mass privatization. Although limited privatization had begun, the major industrial sectors remained under state control.

In 1994 Bulgarian voters—yearning for the economic stability of the communist era—elected the former communists into power, a development that further hindered reform. Rather than transferring inefficient state-owned enterprises to private ownership, the government sustained them or had state-controlled banks extend loans that were never repaid. The absence of structural reform yielded dangerous consequences by 1996, as the value of the national currency, the lev, plummeted, pushing the fragile banking system toward collapse. In late 1996 Bulgaria entered a deep economic crisis, with skyrocketing inflation and a rash of bankruptcies in the banking sector.

In 1997 a newly elected reform-minded government undertook measures to stabilize the economy and to fight the deep-seated corruption prevalent in many of the country’s large enterprises. Since that time, Bulgaria has pressed ahead with pro-market reforms, including the acceleration of privatization. Bulgaria’s commitment to reforms led the European Union (EU) to open membership talks with the country in 2000, and Bulgaria expected to officially join the EU in 2007. Despite these developments, unemployment remains chronically high, and the nation’s per-capita income ranks among the lowest in Europe.

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Today, as in most developed countries, service industries, such as finance, transportation, and tourism, account for the bulk of Bulgaria’s gross domestic product (GDP). However, Bulgaria remains highly dependent on manufacturing and agriculture, which together occupy about half the total workforce. Important manufacturing activities include chemical, metallurgical, machine-construction, and food processing industries. Bulgaria produces and exports many agricultural products, including vegetables, tobacco, and rose oil. Bulgaria’s wines are world-famous. In 2006, Bulgaria’s GDP was $31.5 billion.

A

Agriculture

Emphasis on agriculture, once the largest sector of Bulgaria’s economy, declined significantly after World War II (1939-1945). However, Bulgaria remains a surplus food producer, and farming still occupies a major role in Bulgaria’s economic life. In 2006 agriculture contributed 8.5 percent to the country’s gross domestic product (GDP) and employed about one-quarter of the nation’s total workforce.

Climate and soil conditions support raising livestock and the growing of cereals (especially wheat), sunflower seeds, and tomatoes, grapes, and other fruits. Tobacco is one of the most valuable crops, contributing approximately 20 percent to the total value of agricultural goods. The most important livestock raised include fowl, sheep, and hogs.

Collectivization of agriculture began under communist rule in the early 1950s, and by the late 1980s most farmland was part of the country’s collective farm system. In 1990 private farming was legalized, and from 1992 to 1999 more than 96 percent of collectivized farmland had been returned to its former owners and their heirs.

B

Mining

Coal furnishes the bulk of Bulgaria’s mineral production. Coal-powered energy plants produce more than 40 percent of electricity produced in Bulgaria. Annual coal production (27.2 million metric tons in 2003) has expanded to meet domestic demand. Petroleum was discovered in 1951 on the Black Sea coast; Bulgaria produced 365,300 barrels of crude oil in 2004. Production of iron ore was 120,000 metric tons. Copper, gold, zinc, lead, and natural gas are also commercially exploited.

C

Manufacturing

As a result of privatization reforms begun in the 1990s, many formerly state-owned industrial enterprises are now privately owned. The metalworking and chemical industries, as well as the food-processing, tobacco-processing, and machinery-manufacturing enterprises, are among the newer, more productive sectors. During the 1990s, Bulgaria gained an international reputation for producing high-quality, affordable wines, especially red wines such as gamza, mavrud, melnik, and pamid. Smelting and metalworking industries are largely dependent on imports of raw materials. The ores mined domestically, however, are refined and fabricated into manufactured goods in Bulgaria. Machine building and engineering are being expanded, especially for light electrical equipment.

Textiles are the oldest manufactured products of Bulgaria and, except for cotton goods, largely use domestic raw materials. The manufacture of building materials, including cement, brick, and glass, is well developed, as is the production of leather goods and footwear. Perhaps the most famous—and among the oldest—products of Bulgaria is attar of roses (fragrant rose oil), which is used as a perfume base (see Perfumery).

D

Energy

Bulgaria derives about half of its energy from nuclear power plants, with most of the rest coming from thermal plants burning low-grade coal and waterpower facilities. Bulgaria’s Kozloduy nuclear power plant produces enough energy to permit the country to earn millions of dollars from electricity exports. However, under pressure from the European Union (EU), which expressed concerns about the safety of four of the six reactors at the plant, Bulgaria closed two of the oldest reactors in late 2002, and it agreed to close two additional reactors by the end of 2006. Meanwhile, to meet future energy needs, Bulgaria announced plans to open two new reactors at Belene in the Danube River valley and a new coal-fired plant at Maritsa East thermal power complex in central Bulgaria. Bulgaria produced 38.1 billion kilowatt-hours of electricity in 2003.

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