The U.S. Department of State’s Investment Climate Statements provide information on the business climate of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Bulgaria - Executive Summary

Bulgaria is seen by some investors as an attractive low-cost investment destination, with government incentives for new investment. The country offers some of the least expensive labor in the European Union (EU) and low and flat corporate and income taxes. Labor shortages and inflationary pressures, however, have increased wages and domestic prices. Bulgaria has the lowest labor productivity rate in EU, and wage increases exceed growth in labor productivity. In the medium term, productivity is at risk due to a shrinking population and low investment in innovation.

Bulgaria has received EUR 1.4 billion of a total of 6.2 billion to be spent over a six-year period (2021-2026) from the EU’s post-COVID recovery grant funds through the National Recovery and Resilience Plan (NRRP), which is intended to spur improvements in green energy, digitalization, and private sector development. In order to receive future tranches of funds, Bulgaria must adopt key pieces of legislation, including in its energy and judicial sectors. The Bulgarian government is in the process of renegotiating with the EU parts of the NRRP energy plan. In December 2022, public discussions were launched about the grant provision for the construction of individual use photovoltaic and energy storage facilities. The NRRP aims to add 4,000 MW of RE capacity by 2026.

In February the government announced it would postpone seeking entry into the Eurozone, which it had targeted joining in 2024, following its joining the European Exchange Rate Mechanism (ERM II) in July 2020 and the EU’s Banking Union in October 2020. The next Eurozone entry date depends on whether the government is able to curb inflation and adopt necessary legislative amendments. The Bulgarian currency has been pegged to the euro since 1999. The adoption of the euro will eliminate currency risk and help reduce transaction costs with some of the country’s key European trading and investment partners.

In January 2022 the Organization for Economic Cooperation and Development (OECD) opened accession discussions with Bulgaria, which should help drive additional economic reforms in the coming years.

There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted. There is strong growth in software development, technical support, and business process outsourcing. The Information Technology (IT) and back-office outsourcing sectors have attracted a number of U.S. and European companies to Bulgaria, and many have established global and regional service centers in the country. The automotive sector has also attracted U.S. and foreign investors in recent years.

Foreign investors remain concerned about rule of law in Bulgaria. Investors cite as major challenges Bulgaria’s endemic corruption, difficulty obtaining needed permits, unpredictability due to frequent regulatory and legislative changes, sporadic attempts to negate long-term government contracts, an inefficient judicial system, and problems executing judicial judgments.

In 2023 the government continued granting partial subsidies to businesses for rising energy costs. Tourism, logistics, the service industries, and the automotive sector were particularly hard hit by the COVID pandemic. The Bulgarian economy grew by 7.6 percent in 2021 but in 2022 growth slowed to 3.4 percent due to reduced investment and declining net exports. The war in Ukraine, which has led to higher raw material and energy prices, and the slow recovery of the Eurozone, Bulgaria’s major export market, undercut growth opportunities in 2023. As a result, economic growth in 2023 is expected to slow to under two percent. The war in Ukraine disrupted supply chains, contributed to domestic inflation, and made investors more caution, but it also creates opportunities in Bulgaria to effectively consolidate supply chains through nearshoring.

To access the full text of the 2023 ICS, visit the U.S. Department of State Investment Climate Statements website.