Theologia Voulgari Second Secretary for Economic & Commercial Affairs Embassy of Greece in Sofia

1. Βulgaria * Macroeconomic & Business Environment* Bilateral Economic & Commercial Relations * Prospects Theologia Voulgari Second Secretary for Economic & Commercial Affairs Embassy of Greece in Sofia

2. General Information Territory – 110.994 sq. Km Population – 7.3 million Capital: Sofia – 1.4 mln Biggest cities: Plovdiv, Varna, Bourgas, Rousse Main airports: Sofia, Plovdiv, Varna, Bourgas Ports: Varna, Bourgas Danube ports: Vidin, Lom, Rousse Currency: Bulgarian Lev (BGN)pegged to Euro(EUR 1 = BGN 1.95583) Pan-European Transport Corridors (4, 7, 8, 9, 10)

3. Macroeconomic Environment-Latest data • “Sluggish growth” in 2012: GDP expanded by 0.8% • The main growth driver: Domestic demand • Final consumption stepped up by 1% due to growth in household expenditures - at the same time government consumption decreased by 4.4%. • The import of goods was up 3.4% supported by domestic demand • Exports declined as a result of weaker demand from Bulgaria’s main trading partners. • Current Account Balance: -0.7 (2011 +1.7)

4. Macroeconomic Environment – Latest data Harmonized Index of Consumer Prices: 3.4% (2011-2.4%) Gross value added increased slightly. Positive contributions from agriculture, manufacturing, trade, transportation and accommodation, public administration, entertainment. Negative from the rest. The construction sector posted a 12.6% decline After three years of strong contraction, investment activity stabilised over 2012 supported mainly by public projects and some recovery in FDI.

5. Macroeconomic Environment - Latest data • Registered unemployment increased further to 11.9% (2011 -11%) • The average wage in the economy continued to increase; according to preliminary data by 11.7% and 9.1% in nominal and real terms respectively. • Labour productivity also kept expanding, up 5.4% in 2012. • This resulted in real unit labour cost decrease of 2% yoy. Favorable labour productivity developments were determined primarily by the trade and real estate sectors.

6. Macroeconomic Environment – Latest data Strong Fiscal position: Improved fiscal deficit from to 2% of GDP in 2011 to 1% of GDP in 2012 • Expectations for GDP in 2013 - IMF: 1.5% - European Commission: 1.4% and 2% for 2014 - EBRD: 1.9% for 2013 - World Bank: 1.8% (initially 2.5%)

7. Business Environment: Generally positive • Macroeconomic & financial stability (low budget deficit and government debt) • Low cost of doing business: favorable taxes & lowest cost of labor within the EU • Educated and skilled workforce • Stable currency (Lev has been pegged to the Euro since 2002) • Government support for priority investment projects • Member of E.U., NATO, WTO

8. Business Environment • The business climate indicator rose by 5,7% compared to January 2012. • Respondents had positive expectations about demand and orders in the coming months. • For the first time since mid-2012 there was an improvement across all sectors of the economy. • The assessment of the current and future business situation was more favourable and optimistic.

9. Business Environment –Main types of companies 1. Limited Liability Company (OOD) • Minimum Capital: 2 leva(~ € 1) 2. Joint Stock Company(AD) • Minimum Capital: 50.000 leva (~ € 25.000)

10. Business Environment –Taxation • Corporate income tax applies at a uniform rate of 10%. • Individual income tax is 10 % flat tax rate. • Withholding tax at 5% is deducted from dividends distributed by Bulgarian resident companies. • VAT rate is 20%. • Real estate tax ranges among 0.01 % - 0.45%

11. Government support under the Investment Promotion Act (IPA) Minimum investment amounts must exceed €10m - €3.5m in regions with high unemployment and - €2m for investment projects in high-tech services Benefits for certified investors include: –Shortened administrative procedures –Preferential acquisition of state or municipal land –Financial support for professional training / education –Infrastructure subsidies –Individual administrative services

12. Government support- Sectors Manufacturing Research & development Education Healthcare High-tech services Warehousing and logistics

13. Challenges • Bureaucracy • Corruption • Slow moving court system • A complicated and often non transparent tendering process. • The fact that the country remains one of the EU’s poorest countries with limited consumer disposable income with a rapidly aging population of 7,3 million • The current political situation.

14. Greek investment in Bulgaria Greece holds the third place within foreign investors in Bulgaria after Austria and the Netherlands with overall investment of €3,664 million.

15. Greek investment in Bulgaria

16. Bilateral Trade Relations • For Bulgaria, Greece is the 5th most important trade partner, while, at the same time, Bulgaria is the 6th bigger importer of Greek goods worldwide (2011) • Greece exports a wide range of products (around 2.500 industrial και 400 agricultural) in Bulgaria • Despite the international economic downturn, the Greek-Bulgarian trade volume continually increases. • The trade balance is positive for Greece • According to the latest preliminary data for 2012 (11 months) Greek exports increased by 17,5% and reached € 1,41 billion

17. Bilateral Trade Relations Source: ΕΣΥΕ

18. PROSPECTS • Tourism • Food & drink products • Infrastructure Projects and Real Estate Development • Environmental Technologies • Information and Communication Technologies • Automotive • Healthcare/Medical

19. Thank you for your attention! Theologia Voulgari Office for Economic & Commercial Affairs Embassy of Greece in Sofia economy@grembassysofia.org