site.btaRevenues in Bulgarian Mechanical Engineering Drop - Expert

Bulgarian mechanical engineering is a major industry in Bulgaria, forming more than 10% of the country's GDP in recent years, however, the industry has been seeing decline in its revenues recently, head of Bulgarian Branch Chamber - Machine Building, Violin Nenov, said in an interview for the Bulgarian News Agency. The expert spoke to the Agency in the context of the upcoming Day of the Mechanical Engineer, established by the Council of Ministers on August 12, 1971. The professional holiday is marked on the second Sunday of October, which this year falls on October 13.

Some companies in mechanical engineering are reporting declines of 30% to 40% for the second half of 2023 and the first quarter of 2024, year-on-year, Nenov pointed out and warned that the negative trend is expected to persist.

High energy prices

A major problem for the industry over the past years has been the high cost of energy, Nenov said. He reported that while the state partially covering some of the costs has been beneficial, it is hardly enough to allow the business to plan ahead in peace.

The expert stated that the problem with electricity prices requires a change in the country's long-term energy policy. He pointed out that the country having some of the highest energy prices in Europe and even in the world means that something is wrong with its energy policy. 

Lack of trained personnel

The most serious problem, according to the head of the Chamber, is the lack of well-trained staff. This is a particularly acute problem in the engineering sector, as over the years there has been a significant decline in the number of personnel that have the know-how and desire to work in production. Most if not all of Bulgaria's companies are practically forced to train incoming workers, those with low qualifications too, but especially those with high qualifications.

Nenov explained this trend with the demographic crisis but mostly with the poor quality of education offered in Bulgarian schools and universities. He believes that even if the education system gets fixed, it will take 5 to 6 years before the effect is seen.

According to 2023 data, the industry employs about 120,000 people. It is difficult to estimate how much of a shortage there is, but there is hardly a company that is not looking for staff. Even though specialists are sought and recruited, most of them prove to be ill-prepared.

Import of specialists from third countries

According to Bulgarian companies, importing low-skilled workers from third countries can temporarily reduce the problem with the shortage of staff, but importing highly skilled specialists from these countries is not a panacea. A couple of the potential problems Nenov pointed out were the language barrier and the uncertainty whether a Bulgarian company would be able to retain the employee after their training.

Broken supply chains

The head of the Machine Building Chamber said that disrupted supply chains caused by the global situation as well as stagnation in a number of countries also pose a problem for the engineering sector. The lack of secure supply chains and the extended delivery times of raw materials make it difficult for machine-building companies to run their businesses. If earlier deliveries took from 15 to 30 days, now they can take 3 months, 6 months and even longer.

Crises

The sector has not been spared by the crises in the European and global economies of the last year and a half. According to the latest national statistics for September, that was the worst month since the beginning of the year, Nenov said. He added that the recession of the European economy has a significant impact on the industry, as Bulgaria's machinery production is highly export oriented. Several sectors export more than 75% of their production. The deterioration of the economic situation in the European Union and especially in Germany has serious consequences for our companies, Nenov added.