Bulgarian Businesses Trapped in Rising Wages and Low Productivity

Bulgarian businesses are facing a critical juncture as they grapple with escalating wages amidst persistently low productivity, prompting calls for substantial reforms in the labor market and education system to bolster competitiveness. Economists at the Ministry of Finance's Council for Economic Analysis recently highlighted these challenges during their annual conference. They underscored that Bulgaria's labor costs are rising rapidly without corresponding gains in productivity, lagging behind EU standards. This imbalance poses significant risks to the economy's ability to compete effectively, according to Geoff Gottlieb from the IMF.

Gottlieb emphasized that despite the rising costs, Bulgaria's nominal wages remain comparatively modest within the EU, hindering income convergence. He stressed the urgent need for Bulgaria to tap into its pool of economically inactive youth and to bridge educational disparities compared to Central European and new EU member states through bold educational financing reforms.

Professor Kaloyan Ganev, a council member, echoed concerns over Bulgaria's lagging investment levels compared to peers like Romania and Croatia, particularly in non-residential infrastructure. Ganev pointed out a stark decline in these investments since 2015, reaching their lowest levels in two decades by 2023.

Desislava Nikolova of the World Bank emphasized the imperative of enhancing both public and private investments to stimulate economic growth. The bank's economic memorandum for Bulgaria warned that without ambitious reforms, GDP per capita will not reach European averages for another 15 years. Nikolova stressed the necessity of boosting total factor productivity, human capital, and investment to achieve sustainable economic...