“Older generations grew up with clouds on the horizon, always expecting it to rain. Youngsters are the first saying: ‘Let it rain, I’ll go outside.’ This is the first step towards making a nation.” — Anton Donchev
After years of stability and growth, Bulgaria is navigating a turbulent crisis while no one seems to be paying attention. What’s next for this small European country?
Since 1999 Bulgaria has grown steadily for all but one year. Between 2010 and 2019, it attracted $1.72 billion in foreign direct investment per annum and saw a 134% rise in its real GDP per capita (rGDPpp). Furthermore, Bulgaria is one of only three EU economies expected to grow despite the pandemic.
FDI in Bulgaria from 2010 to 2019. Data in billions of US dollars. © F. A. Telarico. Data: World Bank
Yet in July the country fell prey to a major political crisis, with tens of thousands contesting Boyko Borisov’s government and its attempts to hijack democracy. Some intellectuals consider these protests proof that Bulgarians are “overcoming their fear”. To assess what risks may arise for international investors, Borisov’s tenure has to be evaluated in advance of any potential change. It is only with this in mind that forecasting future outcomes can be more than a guessing game.
Borisov became Prime Minister in 2009. Much has changed in Bulgaria, the EU and the world since then. In evaluating his governments’ achievements three areas can be distinguished: economics, the rule of law and Bulgaria’s international standing.
An economic miracle… wasted
In 2007 Bulgaria became the EU’s “poorest member”; in 2009 its rGDPpp was still lagging at 43% of the EU average. Back then Borisov made his message clear with the choice of his party’s name: Citizens for the European Development of Bulgaria (GERB). He pulled Bulgaria out of the Great Recession and unlocked the funds the European Commission (EC) had suspended in 2008.
Under Borisov, Bulgarian rGDPpp has been growing 2–3 times faster than the EU average (see data below). Moreover, the country took an important step towards adopting the Euro by joining the European Rate Mechanism II in July 2020. However, Bulgaria has not climbed a single spot in EU rankings. Hence, it is no surprise that ordinary people feel they have not benefited from this decade of growth.
Chart of the evolution of GDP per capita in Bulgaria and the EU (2009-2019) with data table showing the relative growth rates. © F. A. Telarico. Data: Eurostat
Estimated at over €11 billion (or 14% of GDP), corruption is the likeliest culprit for Bulgaria’s enduring post-socialist stagnation and its “endless transition”. In 2012 Transparency International ranked Bulgaria 71st (only Greece fared worse in the EU); then, in 2019, Bulgaria placed 74th (behind Greece, Montenegro and Belarus). Ultimately, as a rule of thumb, “corruption discourages investment […] to the detriment of future economic growth”. Moreover, corruption at the highest echelons is an effective talking point for those who oppose Bulgaria joining the eurozone, despite the country satisfying so-called convergence criteria.
A man holding a placard reading “What now? The impudence-meter broke!” © Bulfoto
Attacks against the rule of law
There are entire books on how GERB has tampered with democracy. In 2007, the EU created the Cooperation and Verification Mechanism (CVM) to help Bulgaria develop the “administrative and judicial systems” required for EU membership. Although the EC acknowledged that an independent judiciary was yet to be seen, it terminated the CVM in November 2019. This decision was apparently made solely on the basis of Borisov’s promises to improve “the accountability of the Prosecutor General” and “safeguard judicial independence”. Eventually, mutual trust collapsed in September, when a special ‘Monitoring Group’ addressed 29 urgent questions to Borisov and his Prosecutor General.
Delyan Peevski and Ahmed Dogan in one of their last appearances in parliament together. © Svobodna Evropa (RFE/RL in Bulgaria)
In addition, the country’s media environment is causing “serious concerns”. Whilst in 2009 Bulgaria placed 68th in the World Media Freedom Index (faring better than Kosovo, Croatia and Ukraine), in 2020 it ranked 111th (behind Moldova, Ukraine and Montenegro).
Notably, “oligarch” and former parliamentarian Daniel Peevski reportedly owns about 80% of the media market, while being accused of interfering with other outlets and menacing independent journalists. Moreover, Peevski is a close associate of Ahmet Dogan, éminence grise of the Movement for Rights and Freedoms (DPS), Bulgaria’s third largest party. Since the DPS is seen as profiteering from “Borisov’s system” in exchange for political support, these accusations cannot be overlooked.
Merkel’s protégé
Angela Merkel and Boyko Borisov at the European Council on July 17, 2020. © EPA/BGNES
The US was the only foreign state to criticise Borisov, with its ambassador publicly backing protestors. In the EU Parliament (EUP), Greens and Socialists supported the demonstrators while the German-led European People’s Party swore “full support and trust in Boyko Borisov”. Other EU institutions have been conspicuously silent, especially given how fiercely they uphold transparency and liberalism when it comes to Ukraine, Belarus or Russia.
The chairman of the Party of European Socialists group in the EP tweets her support for Bulgarian protestors.
Forecast
In conclusion, Borisov enjoys a friendly media, allies abroad and a solid grip on power. Since the opposition BSP is “likewise corrupt” and untrustworthy, people often claim that “there is no alternative” to GERB. Thus, plebiscitarian support for the protests is unlikely to lead to Borisov’s resignation. The EUP may well trigger the so-called Article 7 procedure as it did with Hungary. However, like Warsaw and Budapest, Sofia will not receive any concrete recommendations nor will deadlines be set for their implementation.
In a nutshell, Bulgarians’ fight against oligarchy to secure living wages, build a lawful business environment and secure fair elections continues. But success remains elusive, and this may affect how international investors choose to approach the country.
