Dynamics of General and Environmental Protection Investments and the Prospects for Bulgaria's Economic Growth
Vera Dimitrova Pirimova
University of National and World Economy - Department of Economics
Dafina Georgieva Doneva
University of Veliko Tarnovo - Department of Economics
May 8, 2002
After a decade characterized by a difficult transition from central planning and administration towards free-market economy, the conditions of growth in Bulgaria have gradually been improving. Stimulating growth and improving the social position of the population are important factors for Bulgaria's accession to the EU and its integration into the EU economic structures. This major objective necessitates that EU accession criteria be met. The larger part of these requirements have already been covered, with others there is a clear tendency towards reaching the indicators and being soon implemented, still others pose potential challenges before Bulgaria's economic development.
The foreign debt, accrued in the past years and still outstanding, and the general financial insufficiency of funding are serious obstacles before the investments in the production sector, infrastructure and in the protection of the environment. Social problems remain acute, and presuppose providing assistance to incomes and the current spending to a large part of the population, that utilizes significant budgetary funds. The ratio foreign debt/GDP is getting close to normal, nevertheless at present and in the near future the country will most likely fail to meet the ecological requirements, set before our country and all other European countries. The investments in modern technological equipment are considered more urgent, for they will create favourable opportunities for marginal stimulation of economic growth. The commitment to guarantee a definite amount of investments in environmental protection can slow down the growth rate, yet in the longer run these investments would provide for its steady and sustainable acceleration.
The present paper is focused on the dynamic interrelatedness between the investment and ecology factor and Bulgaria's growth rate, and the opportunities for these two factors to impact this growth rate; this analysis will facilitate the selection of the appropriate environmental policy, that will stimulate growth.
The investment effects on Bulgaria's GDP are explored. The paper discusses the marginal impact of investments on Bulgaria's growth rate in the 1990's, so that the approximate parameters of investments boosting growth can be forecasted. The preconditions have been outlined and possible solutions proposed for development of investment and environmental policy. The level and structure of environmental protection expenditures in Bulgaria and the main tendencies in the dynamic of environmental protection investments and their impact on the general investment process are explored. We focus attention on the issue of bringing the environmental policy objectives in line with the economic growth rate.
We come to the conclusion that the rising trend of the GDP cannot be long sustained without prompt environmental investments, and the Bulgarian economic context requires that larger in number direct investments be made in the production sector on a high technological level. Bulgaria's accession to the EU structures, once economic growth is stabilized and the environment is taken due care of and protected, will depend on the successful combination of the economic and ecological policy adopted by the government.
Number of Pages in PDF File: 15
Keywords: economic growth, investments, environmental policy
JEL Classification: E6, O49, O13working papers series
Date posted: June 7, 2002
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