Latest official data point at an economic growth of 3.5% so far while direct foreign investments have been registering a drop of 21%, unseen before. The pace of growth might not be exactly breathtaking, but it still places Bulgaria second in Europe where the average level is 1.8%. This is all even more impressive with a background of a dramatically low level of foreign investments over the same period – a bit over EUR 600 mln. To top it all, the country’s balance of payments is positive with more than EUR 400 mln. and the year will end up with no budget deficit. The small, but powerful Dutch economy has invested the most, followed by our major trade partner – Germany. Next comes neighboring Greece, despite its heavy debt crisis. That fact only comes to show that many companies and capitals have been running away from the land of olives. Rumor has it that tens of thousands of Greek firms have been transferred to Bulgaria so far with the purpose of avoiding the tightening of the fiscal regime there and also due to the favorable tax environment here. One more curious detail: nearly 10 percent of foreign investments are in real estate properties, as the wealthy Swiss top the rankings here.

These numbers seem to be illogical and controversial at first glance. Science says that a small and infirm economy like ours cannot develop successfully without the influx of fresh funding from abroad. Thus the balance of payments should be negative with budget deficit available. Theory says so, while in Bulgaria practice shows that people are the ones to implement the principles of economy – that is politics. One should also add the favorable international environment that the Bulgarian economy is currently placed in – all of its major economic and trade partners from the EU have been registering an economic upturn which only stimulates the demand for Bulgarian companies’ services and goods.

This fact has a significant aspect, regarding foreign investments. Above all, any investor would opt for his own country whenever an economic growth is registered there, due to a series of psychological, economic, legal and cultural reasons. This means that free capital will be less willing to leave the state in search of more profitable, but also riskier and unknown destinations. That is what explains the minimal influx of foreign investments here. At the same time Bulgaria has always been really open as economics and also very sensitive and dependent on the state of the international markets. However, many have opted for this hospitality and have settled their business here.

Commendable economic growth and low volume of foreign investments – that’s the current picture. On the other hand experts say that gradual changes are forthcoming as early as of next year. The Bulgarian economy is considered to have reached the peak of its economic cycle and a gradual cooling is what follows next. Its impact on the influx of foreign capitals which are to be even more necessary is something that is quite early to be predicted. Moreover, a few months of political instability are forthcoming till the next early elections and the assembling of a new parliament and government.

English version: Zhivko Stanchev