2014 Index of Economic Freedom

Bulgaria

overall score65.7
world rank61
Rule of Law

Property Rights30.0

Freedom From Corruption35.2

Limited Government

Government Spending64.5

Fiscal Freedom91.2

Regulatory Efficiency

Business Freedom73.5

Labor Freedom80.2

Monetary Freedom79.6

Open Markets

Trade Freedom87.8

Investment Freedom55.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 7.3 million
  • GDP (PPP):
    • $103.8 billion
    • 0.8% growth
    • 0.7% 5-year compound annual growth
    • $14,312 per capita
  • Unemployment:
    • 12.4%
  • Inflation (CPI):
    • 2.4%
  • FDI Inflow:
    • $1.9 billion
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Bulgaria’s economic freedom score is 65.7, making its economy the 61st freest in the 2014 Index. Its overall score is up by 0.7 point, reflecting improvements in labor freedom, freedom from corruption, trade freedom, and monetary freedom. Bulgaria is ranked 28th out of 43 countries in the Europe region, and its overall score is above the world average but below the regional average.

Over the 20-year history of the Index, Bulgaria has advanced its economic freedom score by about 16 points, a top 20 improvement. With score increases in seven of the 10 economic freedoms, Bulgaria has risen gradually to the ranks of the “moderately free.” Notable structural reforms have included trade liberalization, privatization, implementation of competitive flat tax rates, and modernization of the regulatory environment. Along with the effective maintenance of low inflation, greater monetary stability has also been achieved.

In more recent years, Bulgaria has taken steps to restore fiscal discipline despite a challenging economic environment. Public debt and budget deficits remain among the lowest in the region. Continued reform efforts, particularly in strengthening the independence of the judiciary and eradicating corruption, are needed to solidify the foundations of economic freedom and ensure progress toward greater prosperity.

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Background

Bulgaria joined the European Union in January 2007. Prime Minister Boyko Borisov and his cabinet resigned in February 2013 after nationwide protests over low standards of living, high energy costs, and corruption. Former Finance Minister Plamen Oresharski became prime minister in May at the head of a Socialist Party–led coalition, but protests continued. Tourism, information technology and telecommunications, agriculture, pharmaceuticals, and textiles are the leading industries. Bulgaria is involved in two rival gas-pipeline projects: Russia’s South Stream pipeline and the Azerbaijan/Turkey-backed Trans-Anatolian Natural Gas pipeline. Economic growth is stagnant, largely as a result of the EU economic crisis and internal instability. Bulgaria remains the EU’s poorest country. Prospects for adoption of the euro in the near future have declined.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 35.2 Create a Graph using this measurement

Bulgaria’s democracy is undercut by lack of transparent decision making and widespread corruption. The election of a controversial parliamentarian allegedly connected to organized crime as the new chairman of the State Agency for National Security sparked anti-government protests in June 2013. The judicial system does not enforce property rights effectively, and inconsistencies in regulation discourage private investment.

Limited GovernmentView Methodology

Bulgaria’s top individual and corporate income tax rates are 10 percent. Other taxes include a value-added tax (VAT) and an estate tax. The overall tax burden is about 26 percent of total domestic income. The government budget has been tight as the country tries to maintain its peg to the euro. Expenditures are 34 percent of GDP, and public debt remains at around 18 percent of domestic income.

Regulatory EfficiencyView Methodology

Business start-up procedures have been streamlined, and enforcement of commercial regulations is relatively consistent. Labor regulations are relatively flexible, although the non-salary cost of employees can be burdensome. Although most prices are determined by market forces, rising agricultural subsidies from the European Union have distorted land values.

Open MarketsView Methodology

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Bulgaria’s legal and regulatory systems may be difficult for foreign investors to navigate. Although the financial sector as a whole has managed to cope well with the challenging external environment, the level of non-performing loans has been rising in recent years. The top five banks account for about half of total assets in the banking sector.

Country's Score Over Time

Bar Graph of Bulgaria Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Bulgaria to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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