section_path: Economy
section_name: Economy
paragraph_text: Economy
  
  Bulgaria has an open, high-income range market economy where the private sector accounts for more than 70% of GDP. From a largely agricultural country with a predominantly rural population in 1948, by the 1980s Bulgaria had transformed into an industrial economy, with scientific and technological research at the top of its budgetary expenditure priorities. The loss of COMECON markets in 1990 and the subsequent " shock therapy " of the planned system caused a steep decline in industrial and agricultural production, ultimately followed by an economic collapse in 1997. The economy largely recovered during a period of rapid growth several years later, but the average salary of 2,072 leva ($1,142) per month remains the lowest in the EU.
  
  A balanced budget was achieved in 2003 and the country began running a surplus the following year. Expenditures amounted to $21.15 billion and revenues were $21.67 billion in 2017. Most government spending on institutions is earmarked for security. The ministries of defence, the interior and justice are allocated the largest share of the annual government budget, whereas those responsible for the environment, tourism and energy receive the least funding. Taxes form the bulk of government revenue at 30% of GDP. Bulgaria has some of the lowest corporate income tax rates in the EU at a flat 10% rate. The tax system is two-tier. Value added tax, excise duties, corporate and personal income tax are national, whereas real estate, inheritance, and vehicle taxes are levied by local authorities. Strong economic performance in the early 2000s reduced government debt from 79.6% in 1998 to 14.1% in 2008. It has since increased to 22.6% of GDP by 2022, but remains the second lowest in the EU.
  
  The Yugozapaden planning area is the most developed region with a per capita gross domestic product (PPP) of $29,816 in 2018. It includes the capital city and the surrounding Sofia Province, which alone generate 42% of national gross domestic product despite hosting only 22% of the population. GDP per capita (in PPS) and the cost of living in 2019 stood at 53 and 52.8% of the EU average (100%), respectively. National PPP GDP was estimated at $143.1 billion in 2016, with a per capita value of $20,116. Economic growth statistics take into account illegal transactions from the informal economy, which is the largest in the EU as a percentage of economic output. The Bulgarian National Bank issues the national currency, lev, which is pegged to the euro at a rate of 1.95583 levа per euro.
  
  After several consecutive years of high growth, repercussions of the 2008 financial crisis resulted in a 3.6% contraction of GDP in 2009 and increased unemployment. Positive growth was restored in 2010 but intercompany debt exceeded $59 billion, meaning that 60% of all Bulgarian companies were mutually indebted. By 2012, it had increased to $97 billion, or 227% of GDP. The government implemented strict austerity measures with IMF and EU encouragement to some positive fiscal results, but the social consequences of these measures, such as increased income inequality and accelerated outward migration, have been "catastrophic" according to the International Trade Union Confederation.
  
  Siphoning of public funds to the families and relatives of politicians from incumbent parties has resulted in fiscal and welfare losses to society. Bulgaria ranks 71st in the Corruption Perceptions Index and experiences the worst levels of corruption in the European Union, a phenomenon that remains a source of profound public discontent. Along with organised crime, corruption has resulted in a rejection of the country's Schengen Area application and withdrawal of foreign investment, though the country officially became a full member of the zone in January 2025. Government officials reportedly engage in embezzlement, influence trading, government procurement violations and bribery with impunity. Government procurement in particular is a critical area in corruption risk. An estimated 10 billion leva ($5.99 billion) of state budget and European cohesion funds are spent on public tenders each year; nearly 14 billion ($8.38 billion) were spent on public contracts in 2017 alone. A large share of these contracts are awarded to a few politically connected companies amid widespread irregularities, procedure violations and tailor-made award criteria. Despite repeated criticism from the European Commission, EU institutions refrain from taking measures against Bulgaria because it supports Brussels on a number of issues, unlike Poland or Hungary.