Bulgaria's economy performedrelatively well during the crisis and the economy isreviving. In comparison with other Tenth European Union(EU10) countries, for Bulgaria the drop in Gross DomesticProduct, or GDP growth was below the median, fiscalperformance deteriorated less, and public debt stayed amongthe lowest in the entire EU. In late January 2011 the ECconcluded that in 2010 Bulgaria had made significantprogress in deficit reduction and is on track to exit theexcessive deficit procedure in 2011. The large macroeconomicimbalances observed in 2005-08 had been corrected by 2010with relatively little negative impact on growth relative toother EU10 countries. Since late 2010 Bulgaria'srecovery has been driven by net exports; investment andconsumption are recovering more slowly. As long as theeconomic environment remains favorable and structuralreforms are implemented as planned, the economy should reachand even exceed its pre-crisis level in 2012. This report isintended to inform policy makers, the internationalcommunity, and civil society about Bulgaria's recenteconomic performance and its options for reforming publicspending to enhance competitiveness and growth. It firstreviews Bulgaria's growth strategy and its fiscaladjustment over the last several years and the medium-termchallenges it confronts. The report then analyzesBulgaria's export performance to identify comparativeadvantages and outline policy options to enhancecompetitiveness in the medium term. Reforms should focus onimproving the productivity of the public sector to enhanceservice delivery, improve the business environment, andupgrade infrastructure. The report identifies two generalareas for reform: (i) the wage bill and public employment;and (ii) management of public investment.
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