site.btaBulgaria's Place in Global Exports in 2021

In 2021, Bulgarian exports amounted to USD 41.9 billion, increasing by 31% compared with 2020. Despite the impressive increase, the country went a notch down in the world ranking of economies by export value, from 58th place in 2020 to 59th in 2021, coming immediately ahead of Lithuania and Egypt and behind Slovenia and New Zealand, the Bulgarian Industrial Association (BIA) said in a report titled "Bulgaria's Place in Global Exports in 2021", dated July 29, 2022.

The data used in the report is from the International Trade Centre in Geneva, which has information on 233 economies. Some of the observations may have been influenced by US dollar exchange rate changes, but only slightly, the BIA said.

Other key figures
    
The report says that among the 27 member states of the European Union, Bulgaria held 20th place in export value in 2021 (the same as in 2020), immediately ahead of Lithuania and Croatia and behind Greece and Slovenia. The EU countries with a smaller population than Bulgaria which were ahead of Bulgaria in export value in 2021 were Slovenia (USD 47 billion), Finland (USD 81 billion), Slovakia (USD 104 billion), Denmark (USD 125 billion) and Ireland (USD 190 billion).

Not counting the world's tiniest economies, the largest growth in exports in 2021 compared with 2020 was recorded in Norway, by 95%, followed by Iran 83%, Azerbaijan 62%, Angola 60%, Saudi Arabia 52% and the United Arab Emirates 50%. All of them are major exporters of energy resources. Other larger economies which outstripped Bulgaria (31%) in export growth were Russia, up by 46%, South Africa 44%, India 43%, Indonesia 40%, Australia 36%, Brazil 34%, Turkey 33% and Belgium 32%. Important partners which include Bulgaria in their supply chains and exert direct influence on the country's exports, saw the following export growth rates: the United States 23%, Germany 18%, the Netherlands 26%, Italy 21%, France 20% and Britain 18%.

Bulgaria achieved a trade surplus with seven out of its top 10 export markets in 2021, including leading European exporters such as Germany, Italy, France and Belgium. Until three years ago, this country usually had a trade surplus with Turkey, a big regional player. At present, the two neighbours' trade balance is not in Bulgaria's favour, probably due, above all, to the financial crisis in Turkey.

The present analysis leaves out defence supplies because Bulgaria's National Statistical Institute considers such information to be confidential. According to mirror statistics, that is, data reported by trading partners, Bulgaria exported at least USD 566 million worth of defence products in 2021. A number of countries which buy Bulgarian defence products do not provide data about that, which means that Bulgaria's defence exports are even larger than estimated by mirror statistics. In 2020, the country exported an estimated USD 614 million worth of defence products. Mirror statistics show that in the first four months of 2022 its defence exports amounted to USD 294 million.

Over the last five years, Bulgarian exports grew by an average of 5% annually. Meanwhile, global imports increased by 4% annually. This indicates that Bulgaria continued to expand its international market positions.

Bulgarian exports are dominated by electric and electronic products, copper and related products, machinery and equipment, and energy resources (fuels and electricity). These four groups of products account for one-third of Bulgarian exports. Exports exceed USD 1 billion for each of 15 groups of products, compared with 10 groups previously.

Observations

It is impossible to make an all-valid assessment of the impact of rising prices. In the case of some goods, the growth in export value far exceeds the growth in physical volume. The volume of copper exports has even decreased while their value has increased. In such cases, rising prices play a major role. This typically happens with raw materials. In the case of most other goods, however, the growth in export value is similar or just a little higher than the growth in export volume.

EU and European Economic Area markets are becoming ever more important to Bulgarian suppliers. The shift began long ago but the COVID-19 pandemic seems to have accelerated it. The supply chain integration of these countries is getting stronger. Easier trading is getting more preferable than dealing with trade destinations which require much travel (for negotiations, mounting of installations, maintenance etc.) and where tariff and non-tariff barriers exist.

The structure of Bulgarian exports is changing in favour of products with a higher value added. It is noteworthy that many of Bulgaria's export markets accepted new, higher prices which resulted mainly from rising labour costs and also from higher costs of energy and some metals, among other raw materials. Whether the trend will persist is hard to predict as the prices of natural gas, electricity, metals etc. go further up. The war in Ukraine has caused a deficit of specific noble gases and rare-earth elements (which are used in technological processes and scientific research), and has triggered unwelcome appreciation of lithium, cobalt, manganese, cerium etc.

Raw materials and semi-finished goods still account for a considerable portion of Bulgarian exports, which is not helping the country to shed its reputation as "the EU's poorest member state". Bulgaria seems to have lost the impetus of the pre-accession period and the first few years of EU membership, so it needs new incentives. The incentives should be targeted at innovative enterprises operating in the country, showing robust growth and offering goods and services with a high or very high value added. Foreign investment has an important role to play, particularly as regards employment and the acquisition of new knowledge and skills, but it cannot be expected to restructure the economy by itself in the desired direction. Investment promotion measures need further segmentation.

Technological renovation is slow and has been compromised by not-so-efficient investments under the EU-backed Operational Programmes and the Rural Development Programme. Investments in the manufacture of products are often unsupported by marketing skills and knowledge.

Bulgarian exports are growing even compared to countries implementing active export promotion policies, which are lacking in Bulgaria - policies based on concrete information about markets and country-specific demand characteristics, proactive embassy initiatives, group training, personalized advice, meetings with potential buyers, trade partner missions and promotion of the nation-brand, among many other activities. This shows that some Bulgarian products are quite competitive even without proper advertising.

Some products can be more susceptible than others when it comes to market shocks caused by the COVID-19 crisis and the war in Ukraine. This depends on the diversity of sources and supply routes.

The diversity of high-value-added products is increasing. The export of such products is less affected by the exchange rate of the US dollar and the prices of energy resources and raw materials than products of low value added. High-value-added products (not counting defence supplies) represent about 25% of total Bulgarian exports. Raw materials, energy resources and semi-finished products retained their share of 31-32% in 2020. Note that high-tech production (for example, copper or gold extraction) is not the same as products of high value added.

The following products on Bulgaria's export list have a relatively high value added:

- electric and electronic products, electric instruments; computers, sensors;
- optical products, including such for medical use;
- some computer software products for process management;
- components for auto making and mechanical engineering, hydraulics, mechanical units, batteries, bearings and cables;
- power assist bicycles;
- saturated integrated circuit boards, a kind of product with which Bulgarian suppliers have expanded into a number of highly competitive markets such as the United States, Japan and Southeast Asia;
- videogames;
- refrigerators, freezers;
- some pharmaceutical and medical products, medical instruments and devices;
- skis, snowboards.

The main markets for Bulgarian products of higher value added are the large EU economies. There, the products are built into systems which are sold all over the world.

Bulgarian companies most often export goods to developed countries as subcontractors of major multinational corporations and are thus included in the global supply chains. With time, they acquire the knowledge and skills necessary for a more massive expansion into world markets with their own products under their own brands.

Bulgaria's growing competitiveness is due mainly to the presence of international corporations in the country and less so to local enterprises. Successful Bulgarian companies work mainly for foreign markets, remain unaffected by low competition at home and are not strained by a heavy regulatory burden.