There is a great need for large-scale structural changes, because Bulgarian companies are significantly behind their European competitors in investments in green economy, digitization and innovation.
This is one of the leading conclusions for Bulgaria in the latest investment survey of the European Investment Bank (EIB) among businesses in 28 countries. The data was provided by the EIB's senior economist Atanas Kolev.
The other highlights for Bulgaria in the EIB's investment report for 2023 concern the negative role of high energy prices and difficulties in international trade on Bulgarian enterprises. Here, however, the degree of impact turns out to be weaker compared to the pan-European context.
The report also emphasizes the importance of large-scale state financial support to the private sector. The business has also benefited from its ability to diversify its trading relationships and invest in modern inventory management methods. Such actions have reduced the pressure on the investment plans of Bulgarian companies and as a result the number of investing enterprises has increased, but only marginally and starting from low levels.
Against the background of such relatively good estimates for the country for 2023, investment activity in the Bulgarian corporate sector remains depressed. Investments in the Bulgarian private sector last year remained below the peak achieved in 2008, and the share of investing companies (70 percent) is among the lowest in the EU and the region of Central and Eastern Europe. Against this background, the results for the year 2023 show that three quarters of the Bulgarian companies did not have any innovation activity in the previous year. The lower investments in production capital - tangible and intangible, compared to the GDP of Bulgaria, contribute to the limited potential and the divergence of desires with the real growth rate of the Bulgarian economy.
Bulgaria has the lowest share of investments in intangible assets
The fact that the most innovative Bulgarian companies compete with enterprises from Central and Eastern Europe is somewhat reassuring. However, the problem stems from the enterprises that do not have any innovation activity. Against this background, the investment activity of the private sector, according to the data from the EIB survey, shows that Bulgaria is the country with the lowest share of investments in intangible assets - in research and development (R&D), in software, training and implementation of new organizational processes.
The senior economist recalled the connection of investment in innovation with the growth potential of an economy and its competitiveness. Atanas Kolev defined these investments as key for the countries that have set themselves the goal of accelerating the economic pace and that want to be leaders in the world.
"It is true that Bulgaria is among the countries with the lowest incomes in the EU, but it is among the countries with relatively high incomes worldwide. This is how we should look and think that the Bulgarian economy must be innovative in order to develop faster and faster. From a research perspective, it is clear that richer economies are more innovative. This is our aspiration for Bulgaria to be at the top, not at the bottom, where it is currently among the group of modest innovators," said Kolev.
The EC defines this group as "emerging innovators". Bulgaria's place there is determined by its lowest values for indicators such as financing and state support for R&D of enterprises; scientific publications from the private and academic sectors are also at a very low level; the attractiveness of the research systems in Bulgaria - also, together with the scientific publications in the "Top 10" of citations in each discipline.
"This leads to the conclusion that the Bulgarian economy is not considered very innovative by the EC", explained the senior EIB economist.