Foreign investment in Bulgaria is still hampered mostly by corruption among other factors such as frequent regulatory and legislative changes and a slow judicial system, the U.S. Department of State said.
"Foreign investors remain concerned about rule of law in Bulgaria. Corruption is endemic, particularly on large infrastructure projects and in the energy sector," the State Department said in its annual Investment Climate Statements for 2020 published last week.
Transparency International’s 2019 Corruption Perceptions Index ranked Bulgaria 74th of 180 countries, three places up compared to 2018.
As of early 2020, there are questions as to the Bulgarian government's commitment to upholding its contracts, including with U.S. investors, the State Department noted, adding that a key factor to watch will be the fairness of these negotiations.
Despite its problems with corruption, Bulgaria is seen by many investors as an attractive investment destination, as the country continues to offer some of the least expensive labour in the European Union as well as low and flat corporate and income taxes.
However, the steady rise in wages, significantly outpacing the growth rate of labour productivity, may gradually erode this competitive edge, the report reads.
The gross domestic product (GDP) per person employed in Bulgaria decreased by an annual 5.6% to 7,800.9 levs ($4,700/4,000 euro) in the second quarter of 2020, the National Statistical Institute (NSI) said earlier this month, citing preliminary data.
According to the latest data published by the NSI, the average gross monthly wage in Bulgaria increased by an annual 6.1% to 1,337 levs in the second quarter of this year.
Bulgaria's successful adoption of the euro would fully eliminate the currency risk and help reduce transaction costs with some of the country's key trading partners, the State Department noted.
Bulgaria joined the Exchange Rate Mechanism (ERM II), the mandatory training grounds for the euro adoption, in July.