Bulgaria needs a selective approach when attracting foreign direct investment (FDI) – we do not need investments in general, but the desired investments, which have the greatest potential to support the economic growth and the creation of new jobs. This idea was emphasized by Kristofor Pavlov, chief economist of UniCredit Bulbank, in his lecture today. He was a guest speaker at the conference on “Attracting Investments: New Strategies for a Growing Bulgaria”, organized by Confindustria.

We need almost any FDI that supports the increase of production investments, especially in manufacturing with high added value, says Kristofor Pavlov. According to him we need more FDI to improve the economy’s export potential. We do not need excessive consumption funded with rapid debt accumulation, as this can result in financial vulnerability, thinks the economist of UniCredit Bulbank.

Pavlov presented data according to which, in proportion to the size of the economy, Bulgaria receives the most FDI in the CEE region, up to 83% of Bulgarian GDP in 2014. This is supposed to mean that there is more capital accumulating in our country, which could result in higher productivity and greater increase of GDP. However, this is not happening – the level of capital in Bulgaria is the second lowest among the CEE countries and amounts to 18.6% per capita with an average for the EU (28) in 2015, increasing by 8.8 percentage points in comparison with the level of the same indicator two decades ago in 1995. The Czech Republic, Estonia and Slovenia are regarded as the economies with the highest capital levels at the moment and are among the economies with the highest income per capita in CEE.

The production investments generate return, contribute to the economic growth and the creation of new jobs in the economy that receives the flows of FDI. Examples of these include FDI targeted at the automotive industry in CEE, said Pavlov. However, some FDI fund consumption and not investment or are targeted at the acquiring of already existing assets and do not contribute to the increase of the production capacity of the receiving economies. According to Pavlov, this is the reason why not all FDI have the same role for our country. Some may contribute to the increase of indebtedness or the rise of real estate prices above the levels suggested by fundamental factors.

FDI in the industry are an example of desired investments. They vary between under one fifth of the total FDI in Latvia and Estonia and almost half of the total amount of FDI in Slovakia and Romania. So far the FDI targeted at the real estate and construction sectors have been of the greatest importance to Croatia, Bulgaria and the Baltic countries, where they vary between one fourth and one third of the total amount, Kristofor Pavlov pointed out in his lecture.

The chief economist of UniCredit Bulbank underlined during the forum that the state policy in the sphere of education and the increase of public investment in education have a crucial role in attracting desired investments in the country. Pavlov pointed out that at the moment our country spends under 4% of the GDP for education while in the countries of CEE with the highest income and GPD per capita this percentage is 6-7% of the GDP.

Simona Iammarino, Professor of Economic Geography and Head of Department at the London School of Economics and Political Science, was an honorable guest at the conference. In her lecture she noted that the most important prerequisite for attracting foreign investments, regardless of whether they are by large multinational investors or by small and medium-sized companies, is the use of the advantages of each region and country. The strengths of each region should be considered carefully – local production, traditions in the economy and, on the basis of this, cooperation with large international companies should be sought, Iammarino advised. Bulgaria has very rich culture, a great number of archeological sites and these can be the ground for development of tourism, but the people in London or Rome do not know about them, Iammarino pointed out.

More information for media:

UniCredit Bulbank, Identity & Communications Department

Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Mara Bareva, Phone: +359 2 9264 963 , nbsb/cbsfwbAvojdsfejuhspvq/ch

Beatris Nikolova, Phone: +359 2 9232 528, cfbusjt/ojlpmpwbAvojdsfejuhspvq/ch