Reports
Economic Development in Bulgaria after the Introduction of the Currency Board
2000 Volume 9 Issue 2 Pages 157-171
Details
2000 Volume 9 Issue 2 Pages 157-171
Most of economists stated that there was no reasonable alternative to introduction of the currency board arrangement into Bulgaria as an instrument of fast resort to financial stabilization. It was the precondition for financial support by the IMF and other institutions. The fixed exchange rate of the overvalued national currency set by the currency board, however, will dangerously depress exports, make imports more attractive and delay economic revival and growth. This may discredit the efforts for financial stabilization, including the currency board arrangement itself.
The Copenhagen criteria do not contain any overall quantitative indicator to assess the readiness of the applicant countries. There is a high correlation between the development of a market economy and its competitiveness on the one hand, and GDP per capita on the other. GDP per capita of $12000 at PPP rates is necessary to have decently functioning markets and satisfactorily competitive economies. In 1998 Bulgarian GDP per capita at PPP was $4600. Bulgaria has no chance for the EU accession at a GDP per capita that is five times lower than the EU average. The gap must be reduced substantially. If GDP grows by 2% per annum in the EU and by 4% in Bulgaria and the other Eastern European countries at 1998 PPP rates, Bulgaria will achieve only 32-33% of the EU level by 2015.
In Cologne on 10 June 1999, 15 EU member countries, United States, Russia, South Eastern European countries, OSCE etc., that is 26 countries and 3 organizations adopted a Stability Pact for South Eastern Europe. This Stability Pact listed up projects equivalent to 3,866 million EUR for South Eastern Europe and for Bulgaria 18 projects.
To achieve 4% GDP growth and stability of South Eastern Europe, it is necessary to allocate limited resources by industrial policy not only to develop infrastructures as hardware but also to support small and medium-sized enterprises to increase competitiveness and grow GDP as software. To overcome the backwardness of this region as a periphery of Europe since the 19th century, the EU enlargement should be pursued as a policy matter for conscious resource allocation towards backward regions.
