Market Report

Market Report: Bulgaria

The United States is not the only nation perplexed by the outcome of a Presidential Election. In mid-November, Europe’s 16th-largest country, Bulgaria, also went to the ballot box, with the result causing just as much political confusion as Donald Trump’s victory over Hillary Clinton. However, it wasn’t the winning candidate, ex-NATO General, Rumen Radev, who stirred up the Balkan country – even though he, too, had attracted a vast anti-establishment vote. It’s what happened next.

Radev’s landslide defeat triggered Prime Minister Boiko Borisov’s resignation in adherence to a promise he had made on the election campaign. At a press conference made on the election night, Borisov said his centre-right ruling coalition had apparently lost public support and thus could no longer stay in power and “carry out reforms”. Bulgarian lawmakers accepted the Prime Minister’s resignation after some debate on 16 November, in turn creating a power vacuum mid-way through the cabinet’s four-year term that will leave many an important infrastructure and reform project on hold.

“The Prime Minister’s decision to resign has the potential to plunge Bulgaria into a political crisis to that could last until the spring of 2017,” says Brussels-based political journalist*, Kamen Kraev. “In all likelihood Bulgaria’s outgoing President will need to appoint a caretaker government [as] Bulgaria’s Constitution does not allow an outgoing President to dismiss the country’s parliament during the last months of his term. That can only be done by the new President, who will step in on 22 January. A new parliamentary election could then be scheduled for April.”

According to Kraev, the Bulgarian President is a largely symbolic figure, but has some key prerogatives – including exercising veto power over the parliament’s legislature and supreme command over the armed forces. Radev, he says, doesn’t seem a natural fit for the role: “He has earned Bulgarians’ support at the ballot, but has little experience in the county’s murky politics. [As a result,] Bulgaria is headed for a period of political uncertainty at a time when stability is most needed.”

With Radev being considered pro-Russian – even though he kept reaffirming his commitment to the West and NATO throughout the campaign – Kraev says the question on Bulgaria’s political position going forward is now especially “valid and unavoidable”.

While Radev made clear that there is no obvious questioning of the country’s EU and NATO membership – Bulgaria’s economy is extremely dependent upon EU funding and the EU export market in general – Kraev says Russia still has influence on the seven-million people nation, namely via giant construction projects, energy dependencies and ample, yet often murky business investment. As such, the country has a vested interest in maintaining a stable relationship with both Russia and the West.

In analysing the ensuing balancing act, political analyst Dimitar Bechev said in the London School of Economics blog that the nation “can have its cake and eat it too” by pleasing both – remaining a loyal member of the EU and NATO while reaching out to Russia. Indeed, he explained Radev’s stance is little different from that of outgoing Prime Minister, Borisov. In Radev’s words: “Until recently, I flew a Soviet jet fighter. I graduated from an American academy. But I am a Bulgarian General. My cause is Bulgaria.” Bechev said the country’s post-election position will be determined “by and for Bulgarian politicians and not because of Mr Putin or Brussels.”

The same is likely true for the country’s commercial road transport market, says Desislav Grigorov, Editor of local truck magazine, Kamioni. “Most of the transport equipment used in Bulgaria is made in the EU, especially in Germany and Poland, and there is a lot of investment coming from the West, so there is a strong dependence on Brussels,” he explains. “While they wouldn’t want to burn bridges with Russia, the orientation to the West is obvious.”

According to Grigorov, the automotive parts industry has become one of the nation’s growth engines of late, with close to 100 businesses producing components for western OEMs such as Peugeot, BMW and Mercedes. “The number of auto parts manufacturers has doubled since 2012 as overseas companies have been drawn by Bulgaria’s low tax environment, cheap labour and currency stability, so there are a lot of positive developments that I doubt any politician would risk jeopardising.”

In line with Bechev’s verdict, Grigorov says the headlines announcing an allegedly pro-Russian candidate had won the presidency were bound to alarm many in the West and bring applause from Moscow, “but the reality is that politics are driven by domestic forces, so I can’t see any dramatic geopolitical or economic shifts happening – especially given the rise of the automotive parts industry. The same is true for the local transport equipment market. No one in Bulgaria has bought a Russian truck in at least five years, and there hasn’t been a single new Russian trailer in Bulgaria in at least 15 years.”

However, Grigorov is keenly aware that domestic infrastructure has to continue to improve to allow future growth for the Balkan nation – regardless of who is in charge. “In the wake of the Election, Lazar Lazarov, Chairperson of the Management Board of the country’s Road Infrastructure Agency, has handed in his resignation, which put the spotlight back on infrastructure. Regardless of who is in charge, we need to keep working on building a competitive infrastructure and a safe transport environment. To do so, we need the backing of the West just as much as investment from Russia. Maybe then we can have the cake and eat it, too.”

*Kamen Kraev is also the founder of Vox Orientalis, a blog aiming to express views and opinions on a wide variety of topics concerning the “East of Europe” and its periphery.

Image: dinozzaver / Shutterstock.com

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