site.btaBulgarian ICT Industry Gears Up for Slower Growth Environment

The Bulgarian Association of Software Companies (BASSCOM) Thursday released data showing that in 2023 the industry's revenues would top BGN 8 billion for the first time. BASSCOM presented its Barometer, an Annual Report on the State of the Software Sector in Bulgaria, which has been published since 2009. It is based on software industry analysis by CBN Panoff, Stoycheff & Co.

The meeting was attended by BASSCOM Management Board Chairman Dobroslav Dimitrov and Ilia Krastev, Chairman of the Association for Innovation, Business Excellence, Services and Technology (AIBEST). Labour and Social Policy Minister Ivanka Shalapatova and Deputy Economy Minister Ivaylo Shotev also attended the event.

BASSCOM Advisory Board member George Brashnarov said that until September, the Association thought revenues would grow by 20%, but after the third quarter it saw a sobering in the major markets in Western Europe and the US. Cost cuts will in all likelihood be a leading theme in 2024 and this process is expected to continue for more than a year. "We view these developments as a healthy process against the backdrop of more expensive capital. The latest revenue growth forecast for software companies in Bulgaria is for 12.1% this year," he said.

A growth rate of 20%-plus for the software segment of the ICT industry was typical of the 2015-2022 period, with 2021 being the peak year with a 26.5% increase in operating revenue.   

More than 58,300 people are employed in the software segment (1.7% of the workforce), with each job generating taxes and social security contributions which exceed the national average more than three times, BASSCOM said. The share of social security contributions paid by the software companies in 2022 was 5.1%. Over 8,300 jobs were created in 2022, of which 1,300 are Blue Card jobs taken by non-EU nationals. The industry forecasts that in 2023, software companies will pay BGN 200-plus million more in taxes and social security contributions compared to 2022, so those more than 58,000 employees will provide more than BGN 2 billion in tax and social security contributions to the budget.

The industry's expectations from the Bulgarian institutions include predictability and sustainability of the tax and social security framework, participation of the high-tech sector in the dialogue with the government and the trade unions, digitalization of the institutions and establishment of a coordination unit, boosting the Brand Bulgaria as a country which attracts and retains high-tech companies and their employees' families. The business representatives also called for a radical reform of education, including a review of curricula. 

AIBESTA's Ilia Krastev said that until a few years ago it was best if the state did nothing about the development of the IT sector, but now the situation is different due to the changed environment and the state's level of involvement is important.

The Social Policy Minister made several commitments to the industry, the first of which has to do with the new positioning of Bulgaria and its image abroad. Shalapatova believes it is time to work actively on this together with the ministers of economy and of innovation. Another commitment is to create an environment where the government and business, including ICT companies, can be partners.

The Deputy Economy Minister stressed that the sector's adaptability would be key. Shotev said it is important for the competent institutions to understand the causes of the expected slowdown in revenues in the software segment and the ICT sector as a whole - whether they stem from the Europe-wide context of slowing economic activity or are the result of mistakes made in Bulgaria. If the latter is the case, due in part to legislative decisions, the situation should be remedied.