Chapter 2: Bulgaria
(continued)
2.2 Introduction
Political Situation
After the Bulgarian Socialist Party government and its prime minister, Zhan Videnmov, resigned in December 1996, a new party leader, Georgi Purvanov, was appointed and Nikolay Dobrev was nominated as prime minister. However, mass demonstration prevented the Bulgarian Socialist Party from forming a new government, and early parliamentary elections were scheduled for April 1997. In the meantime, a temporary government was appointed by the president to organize the elections and to prepare legislation that would establish a currency board. As expected, the opposition party won the April election, and the newly elected government's first priority was to stabilize the economy. The introduction of the currency board will depend upon support from the International Monetary Fund.
Economic Situation
The transition from a centrally planned economy to a market economy was expected to have a beneficial impact on the environment, as many governmental policies had contributed to environmental degradation through the years. However, most of the environmental improvements of the past seven years can be attributed to a general decrease in economic activity. Bulgaria's economic transition has been more difficult than that of many other countries because of Bulgaria's high dependence on trade with the former Soviet Union and with other Council for Mutual Economic Assistance (CMEA) countries. This trade once accounted for more than 70 percent of Bulgaria's foreign trade. The loss of these markets led to a serious decline in export and economic growth.
| TABLE 2.1: KEY ECONOMIC INDICATORS
|
| |
1994 |
1995 |
1996* |
1997* |
|
| GDP growth (%) |
1.8 |
2.6 |
-9.0 |
-2.0 |
| Inflation (%) |
96.3 |
62.0 |
220.0 |
60.0 |
| Unemployment (%) |
12.8 |
10.5 |
10.4 |
12.0 |
| Exports (bln USD) |
3.94 |
5.11 |
4.50 |
n/a |
| Imports (bln USD) |
3.95 |
4.68 |
4.00 |
n/a |
| Budget balance (% of GDP)
|
-5.8 |
-5.7 |
-8.9 |
-5.0 |
| Gross debt (bln USD) |
10.3 |
9.4 |
9.5 |
9.6 |
*forecast
Source: Business Central Europe, The Annual Report, 1996 |
By 1995, the economy was improving, but in 1996, the two years of modest growth ended. Gross domestic product fell by an estimated 9 percent, and the inflation rate increased to an annual average of 220 percent. Unemployment also started rising and was estimated at 12.5 percent by the end of the year.
The economic decline was projected to continue through 1997, as annual GDP is expected to decline another 2 percent. However, the economy may begin to grow again in 1998, provided the situation stabilizes before the start of the year.
In 1996, foreign direct investment totaled USD 300 million, an 85 percent increase over 1995. However, foreign direct investment in Bulgaria is still very low compared to regional standards.
REC * PUBLICATIONS * EMERGING ENVIRONMENTAL MARKET 2 * BULGARIA
