Bulgarian industrial production faces decline amid rising labor costs

Economist Yulian Voynov has highlighted several structural challenges facing the Bulgarian economy, noting that while Bulgarian incomes have outpaced inflation in recent years, certain sectors are struggling. Voynov pointed out that dairy product prices in Bulgaria are 30% higher than the European average, even though meat prices remain comparable to or lower than regional levels.

Industrial production in Bulgaria saw a 6.4% contraction in August compared to the previous year, marking the third-largest decline in the European Union. This downturn is part of a nearly four-year trend of decline in low-value-added sectors, such as textiles, metal products, and food production, which have seen their capacity share drop by 25% between 2022 and 2026.

In contrast, high-value-added sectors requiring automation and specialization have seen a nominal increase of approximately 45% over the last four to five years. The decline in traditional industries is attributed largely to rising labor costs and wage increases, which have undermined the competitiveness of low-value-added manufacturing.