Bulgaria - Economic development

Until 1990 when the post-Communist government began a program of privatization, the economy was almost entirely nationalized or cooperatively owned and operated on the basis of state plans. These were designed to expand the economy as a whole, with emphasis on the growth of heavy industry (fuels, metals, machinery, chemicals) and on the development of export goods. In 1971, productive enterprises were grouped into more than 60 state concerns responsible for almost all nonagricultural production.

Bulgaria's first five-year plan (1949–53) emphasized capital investment in industry. The period was marked by a slow pace in agricultural production (owing largely to collectivization and small investment), an inadequate supply of consumer goods, and a poor livestock output. The 1953–57 plan provided for a decrease in industrial investment, with a resultant improvement in agriculture, housing, and living conditions. The food-processing industry, important for export, began to receive greater attention in 1958, as did textiles and clothing. The lagging rate of growth during the early 1960s was due mainly to poor agricultural output and to a slower industrial pace. The third five-year plan (1958–62), with its "big leap forward" (1959–60), was claimed to have reached its goals by the end of 1960, but definite shortcomings remained. The fourth plan (1961–65) devoted 70% of total investment to industry, while agriculture received only 6.5%. Investments directed by the fifth plan (1966–70) adhered essentially to precedent, with some shift toward agriculture, and this trend continued under the sixth plan (1971–75). Of total investment during 1971–73, over 40% went to industry and 15% to agriculture. The 1976–80 plan resulted in a 35% increase in industrial output and a 20% increase in agricultural output. The overall growth rate began to slow down in the late 1970s, and the 1981–85 plan reflected the concept of a more gradual economic growth. Under the 1986–90 plan, it was projected that national income would grow by 22–25%, industrial output by 25–30%, and agricultural production by 10–12%. Priority was to be given to the development of high technology.

In the 1990s, the post-Communist government began a program to reform of the nation's economy. It rescheduled the foreign debt, abolished price controls, and became a member of the International Monetary Fund (IMF) and IBRD. The reforms, however, were not embraced by the Socialist government that took power in 1994 and by 1996 the economy was in a tailspin. The government led by prime minister Ivan Kostov that took power in 1997 laid the financial groundwork for a market economy by selling off state firms, strengthening the currency (lev), and doing away with price controls, state subsidies, monopolies, and trade restrictions. As a result of its successful stabilization of the lev and inflation, Bulgaria is viewed favorably by investors and is a candidate for membership in the European Union (EU). Membership in that body was expected for 2007 if accession requirements are met, including progress on privatization.

The government of Prime Minister Simeon Saxe-Coburg, which came to power in 2001, took steps to reduce taxes, rein in corruption, and encourage foreign investment. Bulgaria nevertheless suffers from high unemployment and low standards of living. A $337 million stand-by arrangement with the IMF, approved in February 2002, was due to expire in February 2004. The government, while pledging to the IMF that it would adhere to sound macroeconomic policies (including controlling spending, strengthening tax administration, curbing inflation, balancing the budget, and strengthening the country's external financing position), stated the improvement of Bulgarians' living standards was central to the country's economic development.