Labour marker recovered to pre-pandemic level though adverse effects persist in some sectors

After a lost decade of transition in the 1990s, Bulgaria only made progress towards economic gains and shared prosperity in the 2000s based on growth rates of 4 to 6% per cent per year. After a sharp drop at the start of the COVID-19 pandemic in 2020 (-4.4 per cent), the Bulgarian economy has almost fully recovered from the pandemic-induced shock. Job retention schemes, positive wage dynamics, higher pension expenditures, and low household debt supported the fast recovery. Real GDP rebounded by 4.2 per cent in 2021. Due to continuing population decline, an extremely tight labour market, the economic impact of the Russian invasion in Ukraine, and deficiencies in infrastructure and the institutional environment, slower growth is expected for the coming years.

While Bulgaria has been lagging behind the rest of the EU in terms of economic development, the gap continues to narrow. Income per capita has been steadily increasing but its level stood at 57  per cent of the EU average in 2021, which remains the lowest in the EU. Income inequality has been on a decreasing trend but its level measured by Gini coefficient was the highest among all EU countries as of 2022. The percentage of Bulgarians at risk of poverty or social exclusion was 32.2 per cent in 2022 which is 10.5 per cent-point higher than the EU average (21.7 per cent) in 2021.

Prior to the outbreak of the COVID-19 pandemic, Bulgaria’s labour market was on a good track. The high growth of the pre-Covid-19 years translated into improved labour market performance and rapid wage growth. Unemployment fell from 13 per cent in 2013 to 4.3 per cent before the pandemic. The outbreak of the COVID-19 pandemic had a marked negative impact on employment in Bulgaria and lead to quickly dwindling employment rates in 2020. Government measures such as wage subsidies and temporary tax exemptions helped to mitigate the labour market impact and explain the relatively low reduction of employment (-2.7 per cent). By the end of 2020, employment levels in many sectors had started to converge back towards their pre-crisis levels. Unemployment rate reached its pandemic peak in early 2021 at 5.7 per cent and has since subsided to 5.3 per cent by 2021.

A concern remains the high number of NEET (youth neither in employment, education, or training). Despite a strong reduction of the NEET rate from 25 per cent in 2011 to 18 per cent in 2021 (age 15 to 29) the rate is still far above the EU average (13 per cent in 2021) and the EU 2030 target (less than 9 per cent). The difference between young men and women without employment, education or training also remains high (14.5 per cent vs. 21 per cent) while this gap for the entire EU is much lower (12 per cent vs 14.5 per cent).

An analysis of the labour market needs to highlight that Bulgaria is confronted with a very pronounced demographic change. The population fell from 9 million to 7 million in only 30 years (1990 to 2019). Emigration alone has contributed to a decline of the economically active population of 10 per cent and continued low fertility will further drive population ageing, raising a number of concerns including the sustainability of social protection system and future labour shortages. In addition, employment differences across regions and across ethnic groups are stark and contribute to unequal labour market outcomes. Especially people living in rural areas and people belonging to ethnic minorities face low employment and high unemployment rates compared to other groups.

Key future challenges of labour market and social policies are the insufficient coverage of the social protection system, labour shortages in certain sectors, skills mismatches, as well as high rates of inactivity among ethnic minority groups, low skilled workers, and rural population.

The cooperation between the ILO and Bulgaria

Bulgaria is an ILO member state since 1920.

Since the 1990s the ILO assisted Bulgaria in its economic and labour market transformation and in its accession to the EU in 2007. Two Decent Work Country Programmes (DWCP, 2006-07 and 2008-09) focused on strengthening collective bargaining, integrating vulnerable groups into the labour market and social protection system, improving occupational health and safety, and supporting pension reforms.

Since then, the cooperation is based on specific technical requests from Bulgaria such as the establishment of a minimum wage fixing system, compliance with fundamental labour standards in the textile and manufacturing supply chain of the country, or alternative labour dispute resolution.

Last updated April 2023