Return to: Index of "1994 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)

                                    1992      1993      1994 1/

Income, Production and Employment:

Real GDP (1993 prices) G,E/       10,773    10,557    10,409
GDP (at current prices) I,E/       8,478    10,557    20,859
Real GDP Growth Rate (pct.) C/      -5.6      -4.2      -1.4
Real GDP by Sector:  G,E,I/
  Industry                         5,063     3,647     3,539
  Agriculture                      1,120       804     1,145
  Trade/Services                   4,632     4,164     5,724
Per Capita Income (USD) G,E,2/     1,209     1,195     1,181
Labor Force (000s) G,E/            3,796     3,787     3,827
Unemployment Rate (pct.) G,E/       15.0      15.8      15.5

Money and Prices:

Money Supply (M1:bil. lev) G/       37.8      36.9      55.0
Commercial Interest Rate (pct.)G/   61.1      58.2      77.9 3/
Gross Domestic Savings Rate I,E/     2.1       2.1       N/A
Gross Domestic Investment          1,739     1,669       N/A
Consumer Price Index I,E/            100       164       342
  (Dec. 1992 equals 100)
Inflation (pct.)
  (end-of-period/Dec-Dec) 4/        79.4      63.9     110.0
Producer Price Index                 N/A       N/A       N/A
Exchange Rate (year-end: leva/$)
  Official 5/                       24.5      32.7      80.0
  Parallel                          25.5      34.0      83.0

Balance of Trade and Payments:  ($millions, current) G,E,I,5/

Total Exports (FOB)               5,090     3,640     3,160
  Exports to U.S.                    85.3     115.3     163.0
Total Imports (FOB)               4,610     4,330     2,820
  Imports from U.S.                  78.9     158.7     106.0
Trade Balance                       480      -690       340
  Trade Balance with U.S.             6.4     -43.4      57.0
Aid from U.S. (fiscal yr.)            40       46        35
Aid from Other Countries 6/          600      154     1,097
External Public Debt ($ bil.)       11.9      12.5       8.7
Annual Debt Service
  Scheduled                       2,918      2,211      850
  Paid                              193         88.8    850 7/
Gold and Foreign Exchange
  Reserves ($ bil.)                  1.7       1.5       1.2

N/A-- Not available.

E/ U.S. Embassy estimate.
G/ Government of Bulgaria.
I/ International financial institutions.
C/ U.S. Department of Commerce.

1/ 1994 figures are estimates for year-end.
2/ Per capita incomes are calculated at following exchange
rates:  1992 24.5 leva:dollar
        1993 32.7 leva:dollar
        1994 80 leva:dollar
3/ BNB basic (lombard) refinancing rate (period average).
4/ U.S. Department of Commerce figures.
5/ Rate depreciated from 32.7:1 to 65:1 from January to
November 1993.
6/ Includes international financial institutions.
7/ 1994 estimate based on first six months data.

1.  General Policy Framework

    Bulgaria's transition to a market economy continued slowly
during 1994.  The nonparty cabinet of centrist economist Lyuben
Berov successfully concluded Bulgaria's drawn-out negotiations
with commercial creditors and the IMF.  Structural reforms
remained stymied and inflation accelerated, in spite of
continued restrictive fiscal and monetary policies.  This,
along with the collapse of Bulgaria's COMECON trade (80 percent
of the pre-1989 total), the global recession, and United
Nations sanctions against Iraq and Serbia resulted in a
prolonged economic downturn, which finally may have bottomed
out in 1994.  After several years of decline, national output
achieved zero growth and production in several sectors
increased.  Unemployment also declined during the year.  Prime
Minister Berov's resignation in September opened the way for
pre-term parliamentary elections on December 18.  The Bulgarian
Socialist Party won a narrow majority in those elections. 
Pending the elections, a caretaker government was appointed by
President Zhelev on October 17.

    The Central Bank (BNB) sought to bring inflation down from
a 3.9 percent to a three percent monthly rate by year end 1994,
using a normal range of policy instruments.  However, inflation
accelerated from 63.7 percent in 1993 to a projected 110
percent in 1994.  The rapid depreciation of the Bulgarian lev
in foreign exchange markets early in 1994 significantly boosted
the lev value of foreign-currency accounts, thereby increasing
the money supply.  To control the fall of the lev, the BNB
significantly raised interest rates.  Later in the year there
was concern that the money supply was being dangerously
increased by BNB credit for several troubled state banks. 
Despite stagnation in the standard of living over
1994, exports of U.S. consumer goods to Bulgaria have risen
given the relative weakness of the dollar versus european
convertible currencies.

    During most of 1994, the government kept its budget deficit
within the 6.5 percent of GDP target agreed to with the IMF. 
It achieved this success through stringent restrictions on
state expenditures and increased revenues from the new VAT
(implemented on April 1) and excise taxes.  U.S. Treasury
Department estimates the deficit will reach about 7 percent of
GDP by year-end 1994, due to increased social security outlays,
expenditures on the elections, and interest on domestic debt. 
The Government of Bulgaria financed the deficit through a
combination of central bank borrowing and treasury bill sales.

    In April, Bulgaria rescheduled its 1993 and 1994 maturities
with the Paris Club (official creditors).  In June, it
restructured 8.1 billion dollars in commercial (London Club)
debt, resulting in a 47 percent reduction.  The government and
the IMF agreed on a Standby Agreement/Systemic Transformation
Facility for approximately 300 million Special Drawing Rights
(about 410 million dollars).  The World Bank released the
second 100 million tranche of its 1991 Structural Adjustment
Loan.  Talks with the Bank stalled on a Financial and
Enterprise Structural Adjustment Loan.

    The transition to a market-oriented economy continued,
albeit slowly and against political and social resistance. 
Structural reforms necessary to underpin macroeconomic
stabilization were not pursued vigorously.  Restitution of
urban shops and houses put capital into the hands of many
ordinary Bulgarians, helping to fuel the rapidly growing
service and consumer goods sectors.  However, legal
privatization of state-owned industry moved slowly, as did the
breakup of state-organized collective farms.

    Bulgaria's association agreement with the European Union
(EU) finally took effect January 1, 1994.  An analogous
agreement with the European Free Trade Association
(EFTA) entered into force in 1993.  With the conclusion of its
EU and EFTA negotiations, Bulgaria returned its attention to
negotiating its GATT accession.  The Bilateral Investment
Treaty with the United States was ratified by the U.S. Senate
and took effect in June.

2.  Exchange Rate Policy

    After several years of remarkable stability, and even
significant real appreciation given inflation, in August 1993
the Bulgarian lev began to fall in foreign exchange markets. 
By March 1994, the lev had fallen 42 percent (from BGL 22.1 to
53:U.S. dollar) and a run on the lev briefly threatened before
it stabilized temporarily at around BGL 51:U.S. dollar.  The
lev continued to depreciate gradually during the rest of the
year.  BNB intervention in the currency market reduced the
country's convertible currency reserves from more than one
billion to around 600 million dollars in February.  Reserves
increased significantly thereafter with the infusion of balance
of payments support from the IMF, the IBRD, and the G-24

    The BNB sets an indicative daily U.S. dollar rate for
statistical and customs purposes, but commercial banks and
others licensed to trade on the interbank market are free to
set their own rates.  A parallel market operates openly
offering about a four percent premium.  

    Only some of the commercial banks are licensed to effect
currency operations abroad.  Companies may freely buy foreign
exchange for imports from the interbank market.  Individual
Bulgarian citizens may legally buy only 10,000 leva worth of 
hard currency per year without specific cause.  Companies are
required to repatriate, but no longer to surrender, earned
foreign exchange to the central bank.  Bulgarian citizens and
foreign persons may also open foreign currency accounts with
commercial banks.  Foreign investors may repatriate 100 percent
of profits and other earnings.  Capital gains transfers appear
to be protected under the revised Foreign Investment Law; free
and prompt transfers of capital gains are guaranteed in the
Bilateral Investment Treaty.  A permit is required for hard
currency payments to foreign persons for direct and indirect
investments and free transfers unconnected with import of goods
or services.

3.  Structural Policies

    Bulgaria's new market-oriented legal structure does not
inhibit U.S. exports, which are more affected by the
government's tight monetary policy and Bulgaria's isolation
from trade financing.  The enactment of an up-to-date
Bankruptcy Law in 1994 was a significant step in bringing
Bulgaria's Commercial Code up to international standards. 
Further revisions in the Code (regarding commercial activity)
and security and exchange laws are under parliamentary
consideration.  Implementation of reforms is hindered by slow
decision making and bureaucratic red tape.  

    Although Prime Minister Berov entered office pledging his
would be the "privatization government," privatization advanced
only marginally in 1994, primarily in small-scale and municipal
projects.  It is estimated that only five percent of state
enterprises have been privatized so far.  After prolonged
wrangling, Berov announced in June a mass privatization plan
closely patterned on the voucher system employed in the former
Czechoslovakia.  Parliament approved the "demand side" program,
but had not yet approved the "supplyside" (including the list
of 360 firms to be privatized in the first wave) when it was
dissolved on October 17.  Implementation of the mass
privatization program now must await the formation of a new
government after the December elections, probably in early
1995.  Meanwhile, caretaker Prime Minister Indjova took steps
to speed up small-scale and municipal privatization.  Until
privatization is well rooted, one can expect a certain
unpredictability in commercial dealings.

    With the implementation of the new 18 percent unified-rate
VAT on April 1, Bulgaria took a significant step in reforming
its tax system.  However, the revised Income and Profits Tax
laws still have not been submitted for consideration to
Parliament.  While average tax rates are relatively low
according to the IMF, U.S. experts believe that marginal tax
rates are too high to stimulate the economy.  There is no
export tax.

4.  Debt Management Policies

    Bulgaria's former Communist regime more than doubled the
country's external debt from 1985 to 1990.  With more than 10
billion dollars outstanding, the government declared a debt
service moratorium in March 1990.  Bulgaria continued to 
service three small convertible-currency bond issues.  Bulgaria
resumed partial servicing of its debt in late 1992.  Of
Bulgaria's current 13 billion dollar debt, more than 80 percent
is owed to foreign commercial creditors; almost half of the
commercial debt is trade financing.  The cutoff of trade
financing by the western banks because of the moratorium has
been the main barrier to imports from the U.S. and elsewhere.

    In April 1994, Bulgaria rescheduled its official ("Paris
Club") debt for 1993 and 1994.  In June, it concluded a Brady
plan-type agreement to reschedule 8.1 billion dollars of its
debt to commercial creditors ("London Club").  This agreement
reduced Bulgaria's commercial debt by 47 percent.  Even with
this debt reduction, however, Bulgaria will be challenged to
meet its total debt service requirements in the next few
years.  Debt to GDP ratio is 84 percent.  

    After protracted negotiations, the IMF approved a one-year
standby agreement/structural transformation facility of
approximately 410 million dollars for Bulgaria in February
1994.  To support the IMF stabilization program, the G-24
countries pledged 330 million dollars in balance of payments
support for 1994. Bulgaria also complied with the final
conditions of its World Bank structural adjustment loan,
permitting the release of the 100 million dollar second tranche
and 100 million dollars in Japanese matching funds.  An
additional 250 million dollars was loaned jointly by the IMF
and World Bank to help finance the initial payment of
Bulgaria's London Club rescheduling.

5.  Significant Barriers to U.S. Exports

    Import licenses are required for a specific, limited list
of goods.  Among others, the list includes radioactive
elements, rare and precious metals and stones, ready
pharmaceutical products, and pesticides.  Armaments and
military-production technology and components also figure on
the list.  (Prior to the dissolution of COCOM, Bulgaria was
granted "favorable consideration status," which means a
presumption of approval for COCOM applications and a shorter
approval period.  Bulgaria has expressed its interest in
membership in the "COCOM successor" regime currently under
negotiation.)  The Bulgarian government has declared that it
grants licenses within three days of application, without fees,
and in a non-discriminatory manner.  The U.S. Embassy has no
complaints on record from U.S. exporters that the
import-license regime has affected U.S. exports.

    The Bulgarian government states that its system of
standardization is in line with internationally accepted
principles and practices.  Imported goods must conform to
minimal Bulgarian standards, but in testing and procedures
imported goods are accorded treatment no less favorable than
that for domestic products.  Bulgaria accepts test results,
certificates or marks of conformity issued by the relevant
authorities of countries signatories to international and
bilateral agreements to which Bulgaria is a party.  All product
imports of plant or animal origin are subject to veterinary and
phytosanitary control, and relevant certificates should
accompany such goods.

    Under the January 1992 Foreign Investment Law, Bulgaria
grants national treatment unless otherwise provided for by law
or international agreement.  Foreign investors may hold up to
100 percent of an investment.  Foreigners may not own
agricultural land, real estate, or natural resources, but may
lease for up to 70 years.  Foreign persons may freely
repatriate earnings and other income from their investments at
the market rate of exchange.  Although capital gains are less
clearly covered in the law, Bulgaria committed itself to their
free repatriation in the U.S.-Bulgarian Bilateral Investment
Treaty signed in September 1992.  Since the 1993 repeal of
special tax incentives, foreign investors have been subject to
the same 40 percent Profits Tax as Bulgarian enterprises.

    Foreign investors are required to obtain a license to own
or have controlling interest in banking or insurance; in firms
manufacturing arms, ammunition, or military equipment; in
so-far unspecified geographic areas; and in research,
development and extraction of natural resources.  A U.S.
tobacco company complained of the lack of transparency in the
issuing of cigarette manufacturing licenses and privatization
in the tobacco sector.

    There are no specific local content or export-performance
requirements nor specific restrictions on hiring of expatriate
personnel.  Bulgaria committed itself in the U.S.-Bulgarian
Bilateral Investment Treaty to international arbitration in the
event of expropriation, disinvestment, or compensation disputes.

    U.S. firms complain that the inflexible or rigid
enforcement of tax and other regulations inhibits investment
plans.  U.S. tobacco companies complain that the arbitrary
classification of cigarette brands for excise-tax purposes
seriously limits the incentives to invest.  A major U.S.
company complained that the inflexibility of the Bulgarian
bureaucracy delayed the startup and increased the cost of a
major investment project.

    There is no legal requirement for the Bulgarian government
to procure only local goods and services.  Government
procurement works mostly by competitively-bid international
tenders.  There have been problems of lack of clarity in many
tendering procedures (e.g. the extension of the E-80
superhighway from Plovdiv to the Turkish border).  U.S.
investors also are finding that, in general, neither remaining
state enterprises nor private firms are accustomed to
competitive bidding procedures for supplying goods and services.

    Bulgaria's new harmonized tariff schedule increased average
tariffs, although a 15 percent import tax was eliminated.  (The
import tax remains on 10 agricultural commodities.)  The new
schedule did reduce the overall range of tariff rates and
eliminated spikes.  Customs duties are paid ad valorem
according to the tariff schedule.  A one-half percent customs
clearance fee is assessed on all imports and exports.  Bulgaria
applies the single administrative document used by European
Community members.

    Imports from the United States are assessed at the most-
favored-nation (MFN) rate.  Bulgaria's Association Agreement 
significantly lowered tariffs and modified quantitative
restrictions on goods orignating in the EU.  Just over 25
percent of U.S. exports to Bulgaria for January-June 1993 were
put at some price disadvantage by these changes.  The United
States is seeking significant reductions in Bulgarian tariffs
on U.S. goods as part of Bulgaria's accession to the GATT.

6.  Export Subsidies Policies

    The Bulgarian government does not subsidize exports. 

7.  Protection of U.S. Intellectual Property

    The adoption in 1993 of new Patent and Copyright Laws
brought the Bulgarian IPR system up to international standards
generally, but enforcement is seriously deficient.  The most
serious problem with current IPR legislation is the lack of
retroactive copyright protection for sound recordings, which
are protected internationally by the Rome and Geneva
Conventions, to which Bulgaria is not a signatory.  Until
Bulgaria does sign, sound recordings copyrighted prior to
August 1, 1993 are not protected.  Bulgaria's third major piece
of IPR legislation, the Trade Mark and Industrial Design Law,
is in need of updating but considered adequate overall. 
Production and trade secrets are nominally protected under Art.
14 of the "Protection of Competition Act."

    Enforcement of IPR laws is problematic.  Authorities have
not established a record of vigorous enforcement to make the
laws credible.  Video and computer program piracy are
widespread.  One major U.S. company estimates that it is losing
15-20 percent of its sales volume due to trademark
infringement.  This firm does not regard the fines or the
publicity given in several successful prosecutions of piracy as
sufficient to deter future infringement.  The U.S. Embassy is
not aware of any cases of patent violation.  For 1992, the
International Intellectual Property Alliance estimated total
trade losses for the U.S. of 47 million dollars due to piracy
in Bulgaria.

8.  Worker Rights

    a.  The Right of Association

    The 1991 Constitution guarantees the right of all workers
to form or join trade unions of their own choice.  This right
appears to have been freely exercised in 1994.  Estimates of
the unionized share of the workforce range from 30 to 50
percent.  Bulgaria has two large trade union confederations,
the Confederation of Independent Trade Unions of Bulgaria
(CITUB), and Podkrepa.  CITUB is the successor to the trade
union controlled by the former Communist regime, but now
appears to operate as an independent entity.  Podkrepa, the
independent confederation created in 1989, was one of the
earliest opposition forces, but is no longer a member of the
Union of Democratic Forces (UDF).  The two confederations
cooperate on some tactical issues, particularly in the
country's tri-partite body, the National Social Council, which
includes employers and government.  The Labor Code passed in
December 1992 recognizes the right to strike when other means
of conflict resolution have been exhausted, but "political
strikes" are forbidden.  Military, police, energy production
and supply, and health sectors are defined as essential
services, and workers in these sectors are restricted from
striking.  There were two major national strikes in 1994, by
students and miners; both ended without major concessions by
the government.

    b.  The Right to Organize and Bargain Collectively

    The Labor Code institutes collective bargaining, which is
practiced both nationally and on a local level.  Only Podkrepa
and CITUB are authorized to bargain collectively.  This led to
complaints by smaller unions, which may in individual
workplaces have more members than either of of the two larger
confederations.  Smaller unions also complained that they are
excluded from the National Social Council.  

    c.  Prohibition of Forced or Compulsory Labor

    Many observers agreed that the practice of shunting
minority and conscientious-objector military draftees into work
units which often carry out commercial construction and
maintenance projects is a form of forced labor.

    d.  Minimum Age of Employment of Children

    The Labor Code sets the minimum age for employment of
children is 16, and 18 for dangerous work.  Employers and the
Ministry of Labor and Social Welfare are responsible for
enforcing these provisions.  Underage employment occurs in the
informal and agricultural sectors, but does not seem to be
either widespread or systematic.

    e.  Acceptable Conditions of Work

    The national monthly minimum wage was adjusted twice in
1994, and at year's end stood at approximately 33 dollars
(1,814 leva).  Inflation in 1994 dramatically increased the
cost of living.  The minimum wage was not enough for a single
wage earner to provide a decent standard of living for a
family.  The Constitution stipulates the right to social
security and welfare aid and assistance for the temporarily
unemployed.  The Labor Code provides for a standard workweek of
40 hours, with at least one 24-hour rest period per week. 
Bulgaria has a national labor safety program with standards
established by the Labor Code.  Conditions in many cases are
worsening owing to budget stringencies and a growing private
sector over which labor inspectors have not yet achieved
effective supervision.

    f.  Rights in Sectors with U.S. Investment

    Overall U.S. investment is relatively small as of late
1994.  Of the nine sectors covered in the Trade Act Report,
only the "Food and Related Products," "Electric and Electronic
Equipment," and "Other Manufacturing" sectors have an active
U.S. presence as of late 1994.  Conditions do not significantly
differ in these sectors from the rest of the economy.  


To the top of this page