In 2020, Bulgaria's gross domestic product (GDP) was 16.7% higher than in 2013, the country's seventh year as a member state of the European Union (EU), according to national statistics. Estimates by the Ministry of Finance based on the econometric model SIBILA 2.0 show that half of this increase is owed to absorbed funds from the EU's second programming period 2014-2020, according to a report posted on the ministry's website last month. The figures represent an estimate of the direct macroeconomic effects of the European Union's structural funds and the projects financed by them. By the end of 2020, 54.4% of the 9.9 billion euro intended for Bulgaria in the second programming period had been absorbed.
The last time an estimate of the EU funds' effect on the Bulgarian economy was made in late 2019 when the Ministry of Finance's figures showed that about a third of the country's growth came from EU funds.
According to the simulations , the total value of GDP created in the period between 2014 and 2020 would have been 8.3% lower without European funds. And that's without the funds meant to help the private sector overcome the effects of the coronavirus crisis.
The significance of EU funds
"For most of the period under review, the country's production and GDP have grown steadily, allowing for gradual real convergence with the EU," wrote the finance ministry. For reference, in the period 2014-2019 Bulgaria narrowed the gap to the European average by only 7 percentage points. In 2019, the country's GDP per capita adjusted for purchasing power was 53% of the European average. Six years earlier it had been 46%.
EU funds have had the most significant effect on private investment. By 2020, the costs of gross capital formation, which include investments in machinery, equipment and buildings, were 23.7% higher than the potential level without European funds, the simulations show. The largest contribution to the increase in investment between 2014 and 2020, of 12 percentage points, came from the Operational Program Human Resources Development (OPHRD). This is also the program with the largest contribution to GDP growth - according to SIBILA's simulations, Bulgaria's economic output would have been 5.4% lower without it.
"OPHRD is predominantly aimed at improving the characteristics of the workforce, and hence at improving the competitiveness of Bulgarian production," said the Ministry of Finance in their report. The biggest contribution came from the program's first axis - Improving Access to Employment and Job Quality.
The benefits of the program can be seen across the board - through OPHRD, employment rose by 10.7%, unemployment fell by 4.8 percentage points which, in turn, led to higher household consumption, production and investments needed for production capacity increases.
The funds absorbed through the human resources development program are also a factor for the improvement of indicators such as the average salary. It is estimated that European funds have contributed 6.7% to the growth of average wages in 2014-2020, which is a little less than one-tenth of the total growth for the period.
The SIBILA model is based on data on factors at play in production, such as the costs of acquisition of machinery and buildings, R&D, training of the employed and unemployed, the construction of new infrastructure and maintenance of existing facilities. The model represents a simulation, which is why it is not so much the absolute values of the indicators that are important rather than the relative differences between the scenarios with and without EU funds. "Due to the short-term nature of the current assessment, it presents mainly the direct effects of the interventions, and the indirect effects are expected to manifest in the medium and long term," the Ministry of Finance wrote. The current assessment does not necessarily represent the maximum benefits that the country can derive from EU funds, according to the report.