by Quentin Morris

Created on: December 14, 2008   Last Updated: September 24, 2011

When Bulgaria joined the EU in January 2007 it opened itself up to the real possibility of foreign investment after seventeen long and economically devastating years of communism. The economic stability that EU membership helped to provide has been instrumental in opening up Bulgaria to the West and investment has been gradually increasing in the country. This cements the steps to economic stability already taken by Bulgaria when it joined NATO in 2004. However, when planning to do business in Bulgaria it is also important to bear in mind the continued political instability in the country and to approach this new and potentially lucrative marker with caution.

Advantages

Finance: The currency of Bulgaria, the lev, is pegged to the Euro. Although this gives Bulgaria little control over inflation, it does provide some stability for the currency and is particularly advantageous given the current strength of the Euro. Bulgaria is also set to join the Euro zone once it has fulfilled its convergence criteria. These are related to financial stability and economic strength in the country. Bulgaria hopes to meet these criteria by 2012 and it seems probably that it will become a member by 2014. Investing in the country before this conversion make good economic sense since costs will soar once the transition is made. The lucrative lure of the Euro is helping to spur the country to solve its economic problems and once the transition is made markets for Bulgarian businesses will really open up.

Bulgaria has made great progress since the fall of communism and is one of the strongest economies in the former Eastern bloc. The country's deficit is below 3% of GDP and public debt is also low. Government debt has also fallen since independence to come in well below Euro zone membership guidelines.[1] It is also ranked third after Poland and Hungary in terms of development since independence. However the cost of setting up a business remains low making it potentially very profitable.

Workforce: With the improving economy, emigration out of Bulgaria as slowed, providing a large and relatively well educated work force. There is also evidence that Bulgaria has suffered less from the brain drain' phenomenon than other eastern European countries. A report from the International Labour Office in Geneva states that MA holders and PhD holders of all fields of science can be shown to have remained in Bulgaria, and the share of workers with completed tertiary education has been on the increase'.[2]

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