site.btaShare of Investment in GDP Plummets, Bulgarian Industrial Association Reports

Sofia, November 27 (BTA) - The share of investment in Bulgaria's GDP plummeted from 33 per cent in 2007 to 18.6 per cent in 2016, the Bulgarian Industrial Association (BIA) wrote in an analysis. "This is an indication that the GDP growth during that period was not due to investment activity, which would have ensured sustainable growth, but to larger consumption and an improved trade balance," the Association points out.

In physical terms, investments in capital assets remained almost unchanged. Public investments were halved, from 5.2 per cent of GDP in 2007 to 2.6 per cent in 2016. On the average, private investments during that period were five times larger than the public ones, and in 2016 they exceeded public investments seven fold.

In physical terms, foreign direct investments (FDI) in 2016 dropped to one-fourteenth of their 2007 level. The downward trend is likely to persist in 2017. The structure of foreign direct investments deteriorated: loans from parent companies account for more than 40 per cent of them. Reinvested profit tends to increase as a share of FDI: it has been positive since 2013 and reached 51.7 per cent in 2016.

The analysis finds a steady growth of Bulgarian investments abroad: from 236.5 million euro in 2010 to 320.2 million euro in 2016, with the level doubling in 2016 from 2015 (147 million euro). "The robust growth of investment abroad leads to loss of national income, jobs and capital and is indicative of a deterioration of the business climate," the analysts argue.

As much as 95 per cent of the funds provided under the operational programmes were absorbed during the 2007-2013 programming period, the BIA says. Absorption peaked in 2014-2015 (the two additional years of the programming period). By November 3, 2017 the proportion of funds contracted for the 2014-2020 programming period was 46 per cent, and the share of disbursements 14 per cent.

As a result of larger private financing, the share of R&D expenditures in GDP increased in the 2007-2015 period. The proportion of R&D expenditures in GDP fell from 1 per cent in 2016 to 0.8 per cent in 2016, considering that Strategy 2020 sets a target of 1.5 per cent for 2020. The Association sees the decrease as an indication of lower quality and less innovative investments.