For many centuries, Bulgaria's economy has largely depended on one large empire or another. In its modern history, the country has basically had two large trading partners - Germany in the pre-WWII era and then the USSR.
In the decades since the fall of the Soviet centrally planned economy, the needle swung back and we've once again tacked to the EU's largest economic powerhouse, relying on its investment and on its large market to sustain our manufacturing.
For the most part, this has been a successful symbiosis - just look at Plovdiv's economic miracle with jobs being created, factories springing up using German work standards and salaries finally beginning to catch up with Western ones.
The downside is that the German economy's stagnation has also undermined Bulgarian industry. And that has been a problem for the past 18 months.
Data shows it: if in 2021-2022 politicians were racing to boast about the record growth of industry in Bulgaria, which for a while was even the highest in the EU, at the beginning of 2023 the trend sharply reversed. Since then, the indicators have been glowing in red. The industrial production index has been hovering around 15% below its last peak for the last few months.
Business turnover has also been falling over the past year. The country's merchandise exports are following this data and are expectedly contracting - sales in the first half of 2024 are down 4.7% compared to the same period in 2023. Those in the machinery and equipment category are about 700 million levs behind last year's levels, or 6.6%. Some businesses are even downsizing and laying off employees.
The declines can partly be explained by a base effect - activity is returning to normal after a period of overheating. This does not mean, however, that the sharp braking after the momentum gained will not be painful for the industry. And Bulgarian business and political leaders need to think carefully about the reasons behind this.
Many of them are purely domestic and can be fixed at home - like the energy prices, which remain high (lowering the energy and, hence, the cost-efficiency of Bulgarian industrial production) due to lagging reforms of the sector. Or the political instability, which disincentivises would-be investors.
Some of the reasons, however, are external - if the economic motor of Europe staggers, it is just normal that one of the "pumps" that feeds it would struggle as well.
Since looking at Germany these days can be a painful sight - the largest economy looks confused, tired, unable to catch up with competition and losing to both China and the US - we should take that as an opportunity to look for new markets and diversify Bulgaria's trade away from its dominant export market.
And since business is far more versatile than politics, expect some to be already looking in other directions.
And speaking of politics
1. Politics this week:
Peevski wins (again)After an extremely complicated legal battle that went through the Central Electoral Commission and the Supreme Administrative Court (SAC) that we dare not try explaining, the most riveting soap opera in Bulgarian politics from the last few weeks has virtually ended: the faction of the MRF loyal to mogul and co-chairman Delyan Peevski has outplayed the faction loyal to honorary chairman Ahmed Dogan and will enter the upcoming early elections using the "MRF" label.
This is not surprising, bearing in mind that Peevski has been instrumental to the capture of the judiciary by installing friendly judges in high places.
Humiliation is the goal
This does not mean Dogan is out of the elections (which at one point seemed possible). He will have to choose a different abbreviation and effectively use the registration of some other minor party if it wants to partake in the vote. But that is humiliating to the founder of MRF and its former guiding light and that is precisely the point.The interesting part is whether the new party - labeled MRF - New Beginning - would be able to attract (one way or another) the number of supporters it had at the last election, bearing in mind the ethnic loyalty that many MRF supporters have towards the Honorary Chairman.
Parliament: lost in foreign agents and gender-bending surgeries
It seems that the US culture wars have finally made a strong foothold in the country. After the "LGBTQ propaganda in schools" bill from some weeks ago, MPs have now decided to fight sex change surgeries. But since they are already outlawed anyway, what's the point?
The new bill is proposed by the WCC-DB coalition and the argument can be summarized as follows: "we know sex change surgeries are banned already and that there are none of them taking place anyway, but we fear that other populist parties might take on the topic, so we decided to file our proposal first."
Speaking of populists, Vazrazhdane tried to follow up on their successful strafe with the LGBTQ propaganda bill with a "Foreign agent ban," but at least for now it seems that this would be too much even for the current shitshow that is the Bulgarian parliament.
2. Economy:
National Bank tries to tighten housing lendingThe National Bank (BNB) will try to tighten housing lending with measures aimed at customers. From 1 October 2024 there will be limits in the ratios of the volume of credit granted to the value of the collateral and the cost of servicing the debt to the client's income, as well as the maximum maturity of loans.
The regulator's decision comes against the backdrop of a continuing boom in mortgage financing for households - by the end of July 2024, the annual growth rate of bank portfolios in the segment already exceeded 25%, and the total volume of exposures reached a record 22.7 billion levs.
Not overheating, just warming up
The central bank signaled that it might resort to similar measures at the start of the year, but subsequently, in a publication from the end of May, it pointed out that for the time being it did not see "overheating" in the mortgage market and only recommended that credit institutions monitor and report on several indicators.
BNB has now warned of a "potential build-up of medium-term risks to the banking system" caused by certain indicators, such as credit growth, leverage, house prices and overvaluation, average loan size, etc., having moved "into a higher risk category".
Figure:
7.4%Is the year on year growth of exports for July, worth nearly 7.9 billion levs, making the month the strongest this year.
3. Business:
Investment Fund of FundsThe state-owned investment fund has started another search for a fund manager for its Innovation in Enterprises Fund, which will disburse 32.2 million euros to 40 companies.
Start-up
MagfiThe Bulgarian venture capital fund Eleven Ventures made its second investment in a Turkish company, funding the Discord and Telegram ad platform startup Magfi with a 600,000 euro injection.
4. Energy:
The tender for the repair of the Chaira is still pending Two months after the National Electric Company (NEC) announced that the new public tender for the repair of one of the units of the Chaira pumped storage hydro power plant is at the final stage, the tender has not yet been announced despite the urgent need to repair the plant. In a response to questions from Capital weekly, the state-owned company reiterated that the publication of the tender for the replacement of hydro units 1 and 4 is imminent and details on it can only be given once this happens. The reason for re-announcing the tender was the lack of interest in the first tender for the repair of one of the turbines. The deadline for submitting documents for it expired in June and despite the initial interest, no company submitted documents for the 53.5 million euro repair.5. Watch out for: Person:Unsurprisingly, the new-old head of the European Commission Ursula von der Leyen chose the GERB politician as a candidate for Commissioner from Bulgaria. The reasons are not so much political as anatomical and social: UVL's main requirement was to have female candidates to choose from to prove that there can be an equal number of both sexes in the highest positions in Europe. Zaharieva's selection is not certain, however - in the aftermath of the announcement, the Brussels-based Euractiv publication, published by GERB critic Georgi Gotev, reminded the audience in the European capital about the 2015-2019 passport scandal that shook the second GERB government while Zaharieva was first a Justice and then a Foreign Minister. That might rattle GERB's cart.
Date:
13 SeptemberWhen the Macedonian president Gordana Siljanovska-Davkova arrives for the first time in Sofia to meet Rumen Radev after the freezing of relations with the newly elected VMRO-DPMNE government in Skopje.
Institution:
The Supreme Justice CouncilAlthough the mandate of the judges and the prosecutors in the highest organ of the judicial system has long since expired (2 years ago), they nonetheless decided to go on with electing a New Prosecutor General. The candidacies will be collected until 10th of October, and the selection will be in January. Since this is a SJC with tons of scandals in their pockets, it is highly doubtful that the procedure will lead to a better outcome this time.
Place:
KvARTal festival
The theme of the eight edition of the event, which takes place in the old center of the capital between Dondukov, Maria Luisa, Slivnitsa and Vasil Levski boulevards, is "The Spirit of Old Sofia". The festival will take visitors back to the beginning of the 20th century, when the district was known as a commercial and bohemian center with emblematic monument buildings. A rich programme includes exhibitions, tours, a vintage car procession, dances and cultural events revealing the history and heritage of this unique area of Sofia.Zen of the week:
Stefan and Maxim Ivanovi - the father and the son who rowed across the Atlantic, strike yet again. This time, they crossed the Arctic Ocean, becoming the first people to do so in a rowing boat - the Neverest. Their goal remains the same: attracting attention to the dismally low number of organ donors in Bulgaria.
For many centuries, Bulgaria's economy has largely depended on one large empire or another. In its modern history, the country has basically had two large trading partners - Germany in the pre-WWII era and then the USSR.
In the decades since the fall of the Soviet centrally planned economy, the needle swung back and we've once again tacked to the EU's largest economic powerhouse, relying on its investment and on its large market to sustain our manufacturing.
