Despite the favorable macroeconomic picture, Bulgaria is among the fastest-aging and most rapidly depopulating countries in the EU.
As Bulgaria received the green light to adopt the euro in January 2026, the country faces a rare opportunity: to move away from a low-cost competitiveness model and embrace innovation-driven growth. This, however, requires more than macroeconomic stability and calls for systemic reforms and bold, open governance.
Bulgaria climbed one spot to 57th out of 69 economies in the 2025 edition of the IMD World Competitiveness Yearbook, published by the International Institute for Management Development (IMD), Switzerland. While this improvement may seem modest, it reflects long-term trends that could yield a significant positive impact if leveraged properly.
Strengths: Solid fiscal base and digital potential
Bulgaria stands on firm macroeconomic foundations and deservedly joins the Eurozone as its 21st member: low inflation (2.6%), steady growth (2.8%), and low unemployment (3.8%). Bulgaria has been a star EU fiscal performer, consistently keeping its debt levels in the lowest top three in Europe. Foreign direct investments remain high relative to GDP. With low labor costs, affordable rents, and competitive service prices, the country is attractive for outsourcing and support services. This stability brings positive results – like its other Eastern European partners the country has enjoyed steady increases in the living standards since it joined the EU in 2007. Yet stability should not be an end in itself — it must serve as a launchpad for the next phase of economic development. Ranked 7th globally in ICT service exports and 8th in mobile and broadband coverage, Bulgaria already has a strong digital backbone capable of supporting high value-added sectors like artificial intelligence, clean energy, and defense innovation, as well as potential to become a regional technology and innovation hub.
Weaknesses: Innovation deficits and human capital erosion
Despite the favorable macroeconomic picture, Bulgaria faces deep structural weaknesses. It is among the fastest-aging and most rapidly depopulating countries in the EU, facing a dual crisis of talent exodus and demographic decline. Ranked 65th globally for long-term employment growth, Bulgaria is losing talent at the very moment innovation requires more. The country teeters on the brink of a human capital crisis, marked by a severe shortage of skilled labor and one of the weakest vocational education systems in the world (69th, last place in both).
Moreover, Bulgaria ranks among the lowest globally in fixed asset investment, patent output, and collaboration between universities and industry. Persistent governance challenges—corruption, politicized public administration, and low institutional trust—continue to undermine investor confidence. The country places 64th in transparency and 65th in investment incentives.
Strategic priorities driving transformation
Bulgaria’s economic engine is running low on innovation fuel. For over two decades, successive governments have relied on the macroeconomic stability secured by the currency board and followed an EU-funded innovation playbook with limited national ownership. While this framework has been sufficient to support eurozone accession, it lacks the power to drive the country into a higher gear of growth. To truly advance, Bulgaria must develop, finance, and sustain its own bold innovation strategy—rooted in domestic priorities and backed by a long-term political consensus through 2050. It could start with a fresh government commitment for a national innovation instrument to the tune of €250 million in 2026, with a timeline to grow to €1 billion until 2030.
This strategy should do more than mimic external models. It should build on the country’s fiscal discipline, harness the success of Bulgaria’s IT sector and embed it across key parts of the networked economy—banking, telecoms, energy. It must also channel ambitious public and private investment into infrastructure and regional connectivity with Europe, Southeast Europe, and the Black Sea. Above all, it must deliver a firm, irreversible push toward full digitalization and radical transparency in public services. Only then can Bulgaria shift from stability to sustained, innovation-led competitiveness.
The Euro: a catalyst, not a cure
Adopting the euro in 2026 is a golden opportunity, but one that will only bear fruit if accompanied by deep structural reforms. The euro can boost national confidence, reduce currency risk and deepen European integration, but it cannot substitute for productivity or the rule of law. The eurozone rewards the prepared — but can also sweep away those who simply drift with the current.
This article is based on the data from the 2025 World Competitiveness Yearbook by the Institute for Management Development (IMD), Switzerland. The Applied Research and Communications Fund is IMD’s national partner in Bulgaria. ARC Fund is a member of the Global Trade & Innovation Policy Alliance.
The analysis was originally published in EUalive.net.
