site.btaBulgaria's GDP per Capita Could Grow to Around 60% of Germany's in Next Two Decades - Bank Analyst

Bulgaria's GDP per Capita Could Grow to Around 60% of Germany's in Next Two Decades - Bank Analyst

Sofia, January 19 (BTA) - Bulgaria's gross domestic product (GDP) per capita could grow to around 60 per cent of Germany's in the next two decades, according to an analysis by UniCredit Bulbank chief economist Kristofor Pavlov.

In 2014, Bulgaria's GDP per capita was 37 per cent of the level in Germany. This is the lowest result among all eleven countries in Central and Eastern Europe (CEE) which joined the EU after the fall of communism, Pavlov says in his analysis. According to him, improvements in some key policies, such as the energy one, and an increase of investments in infrastructure, as well as in human capital, can help speed up the process of bringing the incomes closer.

It is good for Bulgaria to make its energy more easily accessible through diversification of resources' supply routes and sources, the expert argues.

Bulgarian economy has been suffering from insufficient investments in infrastructure throughout the greater part of the last 20 years, Pavlov says. The need of investments in infrastructure exceeds significantly the resources from the EU that the country has the right to receive in the next years. Pavlov noted that the public investments in infrastructure need to remain around 7 per cent of GDP (a level reached in 2015) for a long period - probably for at least two more decades.

In the 2008-2013 period, the average government expenditures for education amounted to 3.6 per cent of GDP, which is far below those of the CEE countries. In the next two to three years, the budget expenditures for education should be increased up to around 6 per cent of GDP, with a guarantee that the universities provide the knowledge which is highest in demand on the job market, the analysis reads.

This looks like a challenging task because, when the needs of increasing the investments in infrastructure and education are taken together, the government should raise its tax revenues by some 4 per cent of GDP. If this happens, the level of the total tax revenues to GDP will be able to come close to the levels observed in the best performing economies when it comes to the process of brining incomes closed together - the Czech Republic, Slovenia and Slovakia, the analyst writes.
 
Reducing corruption, guaranteeing the rule of law, strictly implementing the anti-monopoly legislation and creating a feeling of a more just and fair society are a huge potential for speeding up Bulgaria's economic development, Pavlov argues.