site.btaUPDATED Bulgarian Industrial Association Poll Shows Minimum Pay Raise Will Drive Up Prices of Goods and Services

Plans to increase the minimum wage will push up the prices of goods and services in order to keep staffing at the current level, Dobri Mitrev, President of the Bulgarian Industrial Association (BIA) as he presented to the press a survey among the BIA members on business climate this year and expectations for 2024. The survey was carried out in the period between November 10 and December 10 among 784 companies from all over the country and was done for the nineteenth consecutive year.

Almost half of respondents said they would calculate the cost of pay raise in the prices of goods and services.

Some 16% of respondents said they would only increase the pay of minimum wage earners and keep unchanged the rest. Only 15% said that changing the minimum wage would not affect the well-being of the company, and more than a quarter said that it would force them to raise all wages but that would be unaffordable for their business which is why some plan staff cuts.

The poll also showed that complaints of corruption pressure on businesses doubled: 59% of companies said they have experienced corruption pressure in 2023 against 30% in 2022.

Among the state institutions, the approval ratings are topped by the President’s Office, municipalities and the National Revenue Agency. The businesses are happy with the decision to cut from three to two the days for which the paid leave will be paid for by the employer and the introduction of electronic food vouchers. They disapprove of the making contracts of service on a par with contracts of employment for tax purposes; and fixing of the minimum pay at 50% of the average pay.

There is no widely shared attitude to preserving the reduced VAT (9%) for restaurants; to the requirement for two-yearly updating of the tax assession of real estate; and the increase of the maximum contributory income.

The poll shows a persistent positive attitude to the upcoming euro changeover as those who used to be undecided have joined those who approve.

One of the key conclusions of the poll is that in the conditions of fuzzy prospects, businesses remain highly pessimistic and their plans for the future are cautions and very much oragmatic.

Businesses have the same concerns for 2024, mostly related to the increasing prices of energy resources and raw materials, and inflation.

As much as 43% of respondents in the BIA poll expect an economic decline in 2024 and 23% expect no change.

The majority of respondents see the risks to the development of the Bulgarian economy in the expected price growth and inflation, the fiscal and regulatory burden, the rising cost of labour, Mitrev said. The concerns of the business community are mainly due to the ongoing crises, provoked primarily by the war in Ukraine, and - domestically - by political turbulences that may lead to instability, uncertainty, inability to predict and plan.

Lack of labour, red tape, regulatory burden and insufficient electronic administrative services, frequently changing regulations are among the main obstacles for business.

Expectations of rising prices, and in particular the cost of labour, lead most employers – 67% - to include wage growth in their plans for 2024. One in five plan to maintain pay levels, while 9% are still undecided.

For the first time on Monday BIA presented its index on effectiveness of economic policy (BIA Index), which covers the so-called Economic Policy Triangle with its three pillars: encouraging investment, implementing structural reforms and ensuring responsible fiscal policies. The BIA Index measures Bulgaria’s development in these three areas: Investment and Innovation; Reforms and Institutional Environment; and Fiscal Policy Effectiveness. The new index was presented by BIA economic adviser Dr. Sheryo Nozharov. Regarding Investment and Innovation, and Reforms and Institutional Environment, Bulgaria lags significantly behind the EU27 countries, and is at the bottom of the EU ranking regarding Budget Policy Effectiveness, despite some improvement in 2022 compared to the previous year. The BIA's Economic Policy Effectiveness index shows that Bulgaria ranked last among the EU-27 countries in 2021 and 2022.