Overview

Strategy

Since the opening of its office more than 25 years ago, the World Bank has developed a sound partnership with Bulgaria.  

There is a strong convergence between the recommendations of the Bank’s Systematic Country Diagnostic and the Government’s efforts to accelerate growth and raise living standards. Bulgaria’s reform efforts, in partnership with the World Bank Group (WBG), are promoting policies to address the gap between institutions and service delivery.

The WBG will continue to align its program with the Government’s priorities to create space for broader engagement where there is a potential for transformational impact.

Key Engagement

Partnership with Bulgaria is characterized by knowledge and advisory services provided through Reimbursable Advisory Service (RAS) arrangements, funded by the Government or EU-funded trust funds.

On September 1, 2015, the World Bank’s Vice President for Europe and Central Asia Cyril Muller and Bulgaria’s Deputy Prime Minister for EU Funds and Economic Policies Tomislav Donchev signed a new Memorandum of Understanding (MoU) on partnership and support in the implementation of European Structural and Investment Funds for the 2014–20 period. 

The new Country Partnership Framework (CPF) for Bulgaria was endorsed by the Board in May 2016 and covers a period of six years to coincide with the EU programing cycle. The CPF marks a renewed engagement with Bulgaria, including the first new lending operations since FY11. The program sets up a selective engagement, but with more ambitious objectives in a few key areas where there is strong government ownership and demand for WBG support. 

The high-level regional conference was opened by the World Bank’s Chief Executive Officer Kristalina Georgieva.

On the eve of Bulgaria’s presidency of the Council of the EU, the World Bank, in partnership with the Prime Minister’s Office and the European Commission, organized a high-level conference of the six Western Balkans heads of state with the goal of identifying meaningful and practical measures to boost connectivity. 

Last Updated: Apr 17, 2018

Economy

RECENT ECONOMIC DEVELOPMENTS

Economic growth remained strong in Bulgaria at 3.6% in 2017, only slightly lower than the 3.9% in 2016. Consumption and investment were the main drivers of growth, while the contribution of net exports was negative in 2017. Consumption was supported by a dynamic labor market, rising wages, and eased financial credit conditions.

Strong domestic demand and higher energy and commodity prices pushed inflation up. After three years of deflation, inflation turned positive to 2.1% in 2017.

The fiscal performance remained positive on the back of improved revenue collection and public investment that was lower than planned. Instead of the planned deficit of 0.6% of GDP, fiscal accounts were balanced for the second year in a row.

The current account surplus narrowed to 3.9% of GDP in 2017 compared to 5.3% in 2016, following the deterioration of the trade balance and lower EU transfers.

Poverty as measured by using the upper-middle-income class line of US$5.5 per day (in 2011 purchasing power parity [PPP] terms) is estimated to have declined from 8.5% in 2015 to 7.5% in 2017. However, income inequality in Bulgaria is the highest in the EU and has been increasing over the past several years, as the income of the richest 20% of the population was almost eight times that of the poorest 20% in 2015.

ECONOMIC OUTLOOK

GDP growth is expected to remain robust, reaching 3.8% in 2018. Domestic demand will continue to support growth as the expected intensified absorption of EU funds will boost investment, likely outweighing the negative contribution of net exports. Private consumption is expected to continue expanding, thanks to the tight labor market and rising real estate prices in large cities. Going forward, GDP growth is projected to moderate to 3.6% in 2019 and 2020. Domestic demand should continue to be the driver of growth, with an increasing contribution from investment.

The current account balance is likely to remain in surplus but narrow, as net exports continue to deteriorate due to an expected slowdown in EU growth and projected higher oil and commodity prices.

The fiscal position is likely to weaken slightly in 2018 and 2019, reflecting plans for the expansion of public investment and rising wages and social assistance payments. Strong revenue collection, driven by further improvements in compliance and an increased pension contribution rate in 2018, is likely to support fiscal consolidation in the medium term. However, the lack of improvements in spending efficiency in health, public order, and infrastructure could undermine fiscal consolidation and limit the potential of public spending to enhance growth.

Poverty reduction is expected to continue at a modest pace in the near term. Sustained improvements in employment and wages, as well as recent increases in the minimum pension, should support real incomes and therefore further reductions in poverty. Poverty is projected to fall from 7.5% in 2017, as measured at US$5.5 per day in 2011 PPP, to 7.0%  in 2018 and further to 6.3% by 2020.

Last Updated: Apr 17, 2018

Highlighted Project

Water Sector Engagement

The quality, efficiency, and effectiveness of essential public service delivery, including water and basic infrastructure, remain below what Bulgarian citizens require if they are to realize a convergence in living standards with their EU neighbors.

Bulgarians have almost universal access to improved water in both urban and rural areas, but water networks need to be upgraded and wastewater collection and treatment systems extended. Pipes are on average 36 years old, many are constructed of asbestos cement, and close to 60% of the water is non-revenue. Only 66% of the population is connected to a wastewater collection network, and just 50% to a wastewater treatment plant.

The World Bank currently supports the sustainability of water resources through an ongoing lending operation and past support strategy development in water supply and sanitation and flood protection. According to the new 10-year strategy for the sector, the rehabilitation and construction of water supply and sewerage networks will require BGN 12 billion (€6 billion). However, EU funds will cover only 30-40% of the total capital investments needed until 2020.

In anticipation of the importance of water infrastructure, the Government is considering possible ways of going forward. The World Bank supported these efforts by organizing an international Water Security Workshop in Bulgaria in September 2017, which presented international knowledge on the subject and examples of effective water supply rehabilitation efforts.

Divers have begun construction work on the rehabilitation of the Studena Dam wall.

The World Bank–supported Municipal Infrastructure Development Project responds to the Government’s priorities to i) rehabilitate and complete construction of water supply and sewerage networks to improve service delivery and reduce health risks and ii) upgrade wastewater treatment systems in line with EU directives. Two of the eight priority water supply dams (Luda Yana and Plovdivtsi) are included in this project and a third (Studena) is included for rehabilitation.

Upon completion of this project, it is expected that 170,000 more Bulgarians will benefit from a more reliable and better quality water supply. 

View All World Bank Projects in Bulgaria

Last Updated: Apr 17, 2018