- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
submited on 11.08.2012 in category Regulated markets | Fiscal affairs | Privatisation | Political stability | Monetary policy | Macroeconomic developments
The competitiveness of an economy is among the most exploited topics in academic and political circles. There are many indirect ways to measure an economy's ability to compete with others - ranging from rankings of international organizations like the World Bank, World Economic Forum to global universities and consulting companies. They all rely on some synthetic benchmarks obtained on the basis of often complex methodology. One of the direct methods of determining the competitiveness of the economy is based on the share of the country in world exports or another similar indicator, which directly relies on hard statistical data.
With regard to the first group of indicators of competitiveness, disclosed periodically by international organizations, Bulgaria has not made substantial progress in the period after the onset of the global financial crisis in 2008. On the contrary, Bulgaria has lost several positions in the ranking of the most attractive outsourcing destinations, for instance. Bulgaria has not reported significant improvement in the environment for doing business according to the World Bank.
If we consider the direct indicators, the situation is quite different. In 2011, the Bulgarian economy managed to offset the decline in exports in connection with the global crisis, which resulted in slight expansion of the share of Bulgaria in world exports compared to 2008. The term "world export" means the sum of exports of all countries in the world. The share of Bulgarian exports in the world remains small - 0.16 percent, but still relatively stable. These observations are based on Eurostat data for exports of goods and services, which in turn are derived from the balance of payments of European countries. We must not forget that the balance of payments data are subject to several revisions, which in turn could alter the statistical data.
The share of a country in world exports is determined by the degree of openness to foreign trade and the size of the country itself. Thus, the relatively small share of Bulgaria in world exports compared with other European countries is due mainly to the small size of the local economy. In Europe, a smaller share of world exports have only Malta, Cyprus and the Baltic republics, which have a smaller population than Bulgaria’s. The most competitive European economy is, as expected, Germany with more than 8% share of world exports. Behind it, at a serious distance, are France, Britain, the Netherlands, Italy, Spain, which have multiple times fewer exports than Germany.
Expansion or contraction in the share of the economy in the world exports can be used as an indicator of improvement / deterioration of competitiveness. Bulgaria is among the six member states whose share in world exports is growing. The others are Romania, the Baltic republics and Malta. Interestingly, the proportion of the Baltic countries and Bulgaria expanded though the respective national currencies are pegged to the euro. On the other hand, the devaluation of the currencies of the Central European economies versus global currencies like the euro and US dollar in the period 2008-2011 does not appear to lead to expansion of their positions in world trade. A substantial loss of competitiveness on the global level has been observed in Greece, Malta and Finland (partly due to the diminishing share of Nokia on the global mobile phone market).
In 2012, Bulgaria began to feel signs of a slowdown in exports as a function of the stagnant European economy (See the smaller chart). It remains to be seen whether this will lead to a contraction of our share in world trade or the opposite - to its expansion, given the strong position of Bulgaria in the low- to-medium price segment on many product markets as well as the rapid shift of Bulgarian exporters to Asia, Latin America and Eastern Europe as an alternative to traditional Western European markets.
More details on the competitiveness of the Bulgarian economy and the prospects before individual sectors can be found in the annual report of Industry Watch on the Bulgarian economy in 2012 titled "Is the stagnation coming to an end?".