site.btaUPDATED Institute for Market Economics Reports Economic Growth but Rising Inequality

 Institute for Market Economics Reports Economic Growth but Rising Inequality
 Institute for Market Economics Reports Economic Growth but Rising Inequality
Institute for Market Economics Senior Economist Adrian Nikolov presents "Regional Profiles: Indicators for Development" study, Sofia, November 14, 2024 (BTA Photo/Nikola Uzunov)

In 2022, the strong economic growth of Bulgaria’s several smaller regions resulted in a slight decline in Sofia’s share of the nation's gross domestic product (GDP), Institute for Market Economics (IME) Senior Economist Adrian Nikolov told journalists during IME’s presentation of a Regional Profiles: Indicators for Development study. According to data, Sofia contributed 41% or BGN 68.7 billion to GDP in 2022, down from 43% a year earlier. 

Plovdiv ranks second with 6.5% or BGN 13.7 billion. Stara Zagora's economy, boosted by a strong energy sector, reaches 6.2%. The tourism sector's resumption is a key factor in the positive dynamics in Varna and Burgas. Sofia Region is also moving closer to them, driven by the rapid development of industry and logistics in the broad periphery of the capital. Vidin is the only region with less than BGN 1 billion GDP. 

The study is based on 75 indicators that assess the economic and social environment in this country's 28 regions. In this year's 13th edition, most of the data refer to 2023, except for regional GDP per capita and wage data, as well as individual investment, environment and infrastructure indicators, which are officially published more than a year later. In the areas of administration, education and local taxes, the analysis also relies on data for 2024.

Regional economies’ growth rates

In 2022, Stara Zagora, Plovdiv, Sofia (region) and Varna topped the GDP growth list, while Vidin, Lovech, Silistra, Dobrich, Kyustendil had the slowest development and registered anaemic growth which, according to the authors of the study, creates preconditions for a further increase in regional differences in living standards.

Gross domestic product per capita

Only two regions, Stara Zagora and Sofia (the capital), surpassed the national average for per capita GDP in 2022, with the capital already generating over BGN 50,000 on average per person. Seven regions already have GDP per capita above BGN 20,000, with Sofia followed by Stara Zagora, Sofia (region), Varna, Vratsa, Plovdiv and Gabrovo.

In 2024, the region with the lowest GDP per capita is Silistra (BGN 12,100), followed by Sliven (BGN 12,600) and Haskovo (BGN 12,900). Almost half of the regions, 13 in total, generate GDP between BGN 15,000 and BGN 18,000 per capita, which indicates a relatively equal level of economic development, except for the leaders and the most backward regions of the country.

The main models of regional economies’ development 

The capital is driven by services, which account for 84% of value added, but over the past year there has been a slight increase in the role of industry in Sofia’s economy (15%). Varna (72%) and Burgas (68%), as well as most major economic centres in northern Bulgaria- Pleven (62%), Ruse (63%), Veliko Tarnovo (64%) - also have a high share of services. The exception in this part of the country is Gabrovo, where there is a relative balance between industry (45%) and services (49%). The southern industrial centre of Plovdiv is also moving towards an increased role of services, where they already account for 60% of value added.

Industry plays a major role in the economies of several leading regions, most prominently in Stara Zagora (71%), Sofia Region (62%) and Vratsa (54%).

Most of the regions where agriculture has a significant share are among the last ones in the ranking, with over a fifth of value added generated only in the least developed region of Silistra.

GDP per capita measured in purchasing power standards

An important insight into the economic growth of the regions is the degree of convergence to average European levels, the authors of the analysis point out. Measured in purchasing power standards (PPS), the GDP per capita of the South-West region, which includes the capital, has already reached 97% of the European average, while the least developed part of Bulgaria - the North-West - is only at 40%. 

The gap in average wages between the first and the last region in the ranking is already more than double, with the average gross monthly wage in the capital reaching BGN 3,129 by the second quarter of 2024, while in Blagoevgrad it is 1,519 BGN. The average gross wage in Varna (BGN 2,147), Vratsa (BGN 2,123) and Sofia Region (BGN 2,048) is above BGN 2,000. Wage growth rates vary between 13% in the slower-growing regions and 26% in the leading ones, with the largest increases registered in regions such as Dobrich, Haskovo and Vidin, which probably reflects the significant growth of the minimum wage. 

Pension growth is more uniform, with increases in all regions in the range of 13-18% in 2023. The average pension in the capital reaches BGN 957 a month, while the lowest is in Kardzhali - BGN 633, where the slowest growth in the country is also registered. 

Investments

In terms of investment in the regions, 2022 brings a rapid recovery from the impact of the crisis and a new expansion, not only compared to the pandemic years, but also compared to the high levels of the pre-crisis period, the IME analysis reports. The differences in investment activity are significant, with spending on fixed tangible assets (FTA) in the capital approaching BGN 8,800 per capita, followed by Sofia Region and Plovdiv, where the indicator reaches BGN 4,600 per capita. Montana, Haskovo, Kardzhali, Vidin have less than BGN 2,000 per capita expenditure on FTA, while the remaining regions are in the range of BGN 2,000-4,000 per capita.

According to the IME, this stratification determines the preservation and even increase of inequality in the regional economic development in the future.

Tourism

The tourism sector’s performance is among key indicators of resumption from the impact of the COVID-19 pandemic, the IME said. The analysis notes that on a national level, overnight stays in accommodation establishments in 2023, have already exceeded those of 2019. Among the Black Sea regions, this is only valid for Burgas. Varna and Dobrich will likely need at least another year to reach pre-crisis levels. The smaller tourist regions of Smolyan, Blagoevgrad, Pazardzhik are also showing positive dynamics.

/MR/

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By 05:36 on 25.11.2024 Today`s news

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