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Increasing gap in separate regions’ economic development in Bulgaria

Photo: BGNES

The gap in the economic development of the separate regions in Bulgaria has been increasing, the annual research of the Institute for Market Economics on the markets’ development shows. Both in the pre-2008 period of economic boom and over the crisis that followed, the capital Sofia has been developing really rapidly, still concentrating a growing segment of the country’s overall economic activity at the expense of the other regions, says IME’s Chief Economic Expert Desislava Nikolova and adds:

“There are several other districts with good development pace and these are Varna, Stara Zagora and Plovdiv. Most of the other regions are lagging behind and regress is observed in some of them, i.e. their GDP is diminishing, compared to what’s average for the EU. Pernik, Kardjali, Silistra and Razgrad regions hit the bottom of almost any economy rankings. This is due to the deep structural problems in their economies which hold their development.”

Direct foreign investments and the ones of local companies are one of the keys to the faster development of the major cities. This means higher standard of living, higher level of employment and income. The view has been imposed over the past years on EU funds being the major solution to problems in areas of regress, Desislava Nikolova says and adds:

“Our research this year has tried to figure out whether the high level of EU funds’ absorption contributes to overcoming the differences between the separate regions. Unfortunately this is not the fact. The EU funds are even an obstacle in the process, as one can see that the big and rapidly growing districts are the ones with the highest rate of absorption. Besides that the human factor is stronger across those. Successful European projects are written there, while the funds absorbed in the less developed municipalities and districts are far below what’s average. Many Bulgarian municipalities have begun to focus on EU funds too much and this money has turned into an end in itself instead of an instrument of regional policy. I think this is very harmful and doesn’t contribute to the more balanced development of the regions. On the contrary, the differences between those are getting deeper, especially in periods of high economic growth.”

At the moment the average wage in Sofia is 4 times higher than in Vidin – the region with the lowest wages. The GDP per capita in the capital is 2 – 3 times higher than across the poorest areas, now reaching the average EU levels. At the same time the GDP in many districts is barely between 20% and 40% of what’s average for the union:

“The solution of this problem lies in the serious reconsidering of regional policy. We should start a debate for true decentralization and for more power allocated to local authorities, regarding direct taxes, collected from the population. Only in this way they have stimulus to attract investments and to work for the opening of new jobs because this will mean better revenues for their budgets. Thus the municipalities will be able to aim at goals which are not parachuted, but in favor of the local communities’ development.”

Catching up will be a tough process across some regions. May be non-standard measures should be used, such as the establishment of tax-free areas. Otherwise no investors are going to show interest, as most of the qualified manpower left those spots long ago and for good.

English version: Zhivko Stanchev 

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