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2021 OECD Economic Surveys: Bulgaria 2021

Economic Assessment

image of OECD Economic Surveys: Bulgaria 2021

The COVID-19 outbreak abruptly stopped several years of robust economic growth in Bulgaria. Public finances are sound and the government took rapid action to support firms and households. Coping with the pandemic and strengthening the recovery will require continued fiscal support, public investment and the advancement of priority reforms. Bulgaria also faces the challenge of how to sustain and ultimately enhance improvements in living standards for all to tackle rising inequality and persistently high poverty. Tackling obstacles to business sector growth will be key to attracting investment, boosting productivity and providing people with skills to take advantage of new job opportunities. Many rural regions are suffering from depopulation and rapid ageing. Regional income differences in Bulgaria are larger than in most OECD countries and growth has been lower in regions without larger cities. Investments in infrastructure and housing reform would help to boost mobility and strengthen links to national and international supply chains.

SPECIAL FEATURES: STRUCTURAL REFORMS TO RAISE PRODUCTIVITY AND BOOST CONVERGENCE; REDUCING REGIONAL DISPARITIES FOR INCLUSIVE GROWTH

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Executive summary

An open economy with a large manufacturing sector integrated in global value chains, Bulgaria has made strong income gains in the past two decades. A sound macroeconomic framework and deepening integration with the European Union have allowed progress towards euro area entry.Prior to the pandemic, unemployment had reached historical lows, and wages had grown substantially. Impressive structural reforms were made to boost productivity, increase income convergence and address social challenges. The COVID-19 pandemic has interrupted this progress, with an output fall not seen since the 1996-97 banking crisis (Figure 1).

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