INVESTOR CLIMATE
in Bulgaria
Investing your capital in Bulgarian projects will increase the value of your European portfolio
The Bulgarian economy has been fairly resilient to the global financial markets turmoil in 2007. Nevertheless, the deterioration in the international economic outlook is expected to have an impact on the economy and lead to a reasonable slow‐down in economic activity. Real GDP growth will thus moderate to below 6% in 2008 and 2009, although the catching‐up process, in terms of GDP per capita, remains vibrant. Prolonged and growing uncertainty on the international financial markets, a more protracted slow‐down in world growth,and higher external oil, food and commodity prices might imply a deceleration in domestic demand. Tighter global liquidity conditions, rising interest rate spreads, and lower returns are expected to bring a decrease in FDI and investment growth. Private consumption growth will remain stable due to declining inflation and lower bank credit growth. However, relatively strong wage and robust employment growth as well as the favourable impact from the reduction in personal income taxation on disposable income should limit this deceleration. On the external side, exports are expected to recover from the dip in 2007 as the large build‐up in investments over recent years starts to improve the export potential of the economy. At the same time, in line with weaker domestic demand, import growth should cool down. The negative contribution of net exports to growth will thus decrease. With the trade deficit starting to narrow, a gradual reduction in the current account deficit is foreseen. This, together with strong capital transfers from the EU, should help reduce the net borrowing of the economy to around 19% of GDP in 2009.
MAIN REASONS TO INVEST IN BULGARIA
- Strategic geographic location;
- The lowest operational costs and tax rates in a European market economy;
- Highly‐skilled, multilingual workforce at Europe's most competitive wages;
- Stable and predictablebusiness and political environment;
- EU membership;
- Free trade with the EU preferential trade partners, including EFTA,Turkey, Mediterraneancountries, Western Balkan countries, South Africa, Mexico, Chili, etc.;
- 10% corporate income tax rate;
- 10% personal income tax;
- VAT exemption on equipmentimports forinvestment projects over EUR 5 million;
- Annual depreciation rate of 30% for machinery & equipment, 50% for new equipment used in new investments and 50% for software and hardware;
- Treaties for avoidance of double taxation with 61 countries;
- Agreements on mutualprotection and promotion offoreigninvestment with 60 countries;
- Acquisition of land and property through a Bulgarian registered company with up to 100% foreign ownership;
- Fast administrative services;
- Natural and cultural landmarks, tasty food and hospitality;
- Bulgaria is on top of the agenda of European Real Estate investment funds;
- Dramatic increase for quality accommodation at Bulgarian resorts;
- Attractive return on investment in the real estate sector, on average between 15% and 18%;
- Property prices still the lowest in Europe;
- Developed infrastructure;
- Government has repeatedly pledged to keep its prudent fiscal policy and run a budget surplus of over 3 percent of GDP next year to counter external risks;
- Institutional support for major foreign investments projects;
- Robust legal framework focused on attracting and protecting foreign investment;
- Significant reduction in bureaucracy;
- Adoption of International Accounting Standards (IAS);
- Bulgaria is among the leading investment destinations in Europe;
- According to IMF, inflation is expected to be reduced to 6% in 2009;
- We expect a solid performance from infrastructure construction along with related input suppliers and construction material producers. Strong performance is also likely from the higher value‐added manufacturing;
- Positive growth prospects underpinned by recent EU accession and the ever‐ improving business scope environment provide for a favourable outlook for the majority of the sectors in the medium term;
- Large amount of ongoing foreign direct investment;
- Excelletn property prices and growth potential compared with most other European location;
- Property construction puts emphasis on high quality design and build with minimal environmental effects.
Foreign investors are confident in the good future of Bulgaria as a place for direct investment. The focus was redirected by the industry to activities with higher added values. Main reasons determining increases the interest of investors (According to the Ernst & Young Southeast Europe Attractiveness Survey 2008 second edition of the study of global consultancy) are favourable corporate taxation, the reasonable cost of labour and flexible labour laws. Even greater interest would be improved if the telecommunications infrastructure is getting better, higher quality of life and social climate, ameliorated transport and logistics. Bulgaria take third place on attractiveness in the Balkans. 60% of investments are in the industry. Turkey is primarily with resources on projects, andRomania is on second place with the highest number of projects.