Bulgarian Economic Growth Hurt by Unemployment and Shortage of Qualified Professionals

Gergana (25) is living with about 650 levs (330 Euro) per month in Sofia, Bulgaria’s capital. She feels like a part of the so called ‘working poor’ class and yet she is working in one of the biggest banks in Bulgaria. The young woman pays rent and occasionally goes out on Friday. When receiving her paycheck Gergana is happy – „I’ll have stakes tonight“, she says and carefully maps out her salary during the month.

828 levs (423 Euro) is the average monthly salary in Bulgaria for the third quarter of 2013, according to the most recent national statistics. It is the lowest among the 28 EU member states. And the numbers don’t show the net pay that individuals receive after taxes and the cost of benefits. With reduction of 22 percent in taxes and benefits people get a take-home pay of about 620 levs (315 Euro). There is little left for savings or holidays when the cost of living  is 565 levs (288 Euro) per month, Confederations of Independent Trade Unions in Bulgaria figures show.

Economic Growth

Bulgaria is referred to as the poorest EU member-state with GDP per capita less than 50 percent of the EU average. Still the economic growth was 0.7 percent for the quarter ended September 30 – the highest quarterly growth for 2013 and one of the highest levels among the 28 EU block.

Economists predict economic growth will quicken in 2014 with estimates between 1.2 and 1.7 percent. The government forecast for 2014 is 1.8 percent.

But foreign direct investment fell nearly 30 percent in the first eleven months of last year and has significantly tumbled in the last few years.

„To recover investment activity in Bulgaria it is necessary to improve the business environment and the conditions for creating new jobs“, – said Georgi Stoev from the think-tank Industry Watch in an interview for Focus Information Agency. In his opinion the administrative cost for hiring and firing employees should be reduced.

The business sentiment index is up with 4.6 percent in January from the previous month.

Brain-drain and education

A big problem for the Bulgarian labor market is the so called brain-drain. Qualified professionals are leaving the country with the hope of obtaining a higher living standard in the richer EU states. Now, after January 1, with the end of EU work restrictions for Bulgarians, some experts fear that the problem with emigration will deepen and that some under-qualified workers will choose to work abroad permanently. According to estimates of the World Bank by 2020 the workforce in Bulgaria will shrink with about 40 percent. Factors for that are the low fertility and high mortality rates, as well as the significant emigration.

When the educated ones emigrate, a deficit of qualified professionals will naturally occur in some sectors of the economy. 2 billion is the loss in the IT sector because of unrealized orders according to the Bulgarian Industrial Association (BIA). The reason is insufficient number of IT specialist. The Bulgarian Association of Software Companies forecasts that the need of IT professionals will double in the next 2-3 year.

At the moment Bulgaria is also experiencing a serious shortage of engineers, mathematicians, doctors and teachers. At the same time there are too many people with degrees in Economy and Administration who aren’t needed in the private or public sector.

„When we had economic boom there was a place for the unqualified labor but now when we exit a deep recession the problem with the unqualified arises“ – said Bozhidar Danev, Executive Chair of the BIA in an interview for the Bulgarian newspaper „Standard“.

13,1 percent is the unemployment rate in Bulgaria in December where that among people with a Bachelor degree or higher is about 4 percent, recent studies show.

There is structural unemployment in Bulgaria where in times of economic expansion with the need of new jobs the unemployment rate also rises. The businesses are growing but can’t find the people they are looking for,  Yavor Aleksiev from the Institute for Market Economics says. The requirements of the businesses are changing but not the qualifications of the unemployed. In the opinion of Aleksiev, Bulgaria needs an effective government policy on trainings and education and to reduce the cost of benefits for the employers.

According to experts not only emigration but also the lack of adequate education is a factor for the shortage of qualified professionals and unemployment among people with secondary education or less.

Government policy

The government of Prime Minister Plamen Oresharski is willing to implement reforms focused on education and youth unemployment and vocational secondary education. There is already a government proposal of quotas for the different majors in the universities. That measure was supported at the end of last year by the business that wants to see an education system that could provide its needs and that creates more IT specialists and not accountants. At the same time the business, as well as independent economists, claim that some of the government’ proposed changes in labor legislation will further hamper hiring new employees.

The socialist-led led government is focused on implementing social policies but also supporting the business. Oresharski’s administration has exerted efforts to speed up reducing the administrative cost for companies and individuals who must obtain dozens of different permits and licences in their everyday work. The effort received  moderate praise from business organization. Although there is a long way to go before Bulgaria could be proud of electronic governance some of the administrative taxes hindering the businesses are successfully being removed. Furthermore, at the beginning of the year companies got back 500 million levs in tax rebates – a process that was held up for months.

The Bulgarian economic outlook is positive but experts fear that further emitting external debt is a mistake. The government expects a deficit by 1,8 percent in 2014. In December Standard&Poor’s ratings agency downgraded the outlook on Bulgaria’s credit ratings from „stable“ to „negative“, citing „challenged“ by anemic domestic demand and still-high unemployment rate growth prospects and complex political climate.

2 мнения за “Bulgarian Economic Growth Hurt by Unemployment and Shortage of Qualified Professionals

  1. On the day I left Bulgaria the last time, I couldn’t pay my phone bill, because the payment system was down for an indefinite period; when I paid my electricity bill I had to wait about 20 min just for the transaction to succeed; websites of respected institutions look like my first ever IT attempts in the 7th grade… But these are all small things. The shortage will become increasingly apparent over the next years, worsening people’s life quality and probably slowing down the economy. Reliable software is essential for the development of a country in the 21st century.

    Recently I read about plans to import software engineers from Romania, India, and China. Not that I have something against, but it’s a pity that’s a necessary step for a country with so strong traditions in IT.

  2. In the post you mention many facts that I’d like to read more about. Could you please refer to your data sources wherever possible?

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