Bulgarian business on the threshold of 2024: Main challenge is the lack of skilled labor and the increased labor costs

After a year of challenges and opportunities, the Bulgarian business is looking forward to the new 2024 cautiously, yet with optimism and expectations for increased economic growth, reduced inflation and controlled employment levels. Economic growth was supported by the domestic demand and the exports, with the GDP reaching 1.7% in 2023 and 3.2% in 2024. Despite the global challenges, the Bulgarian economy is demonstrating resilience and growth potential.

Skilled labor shortage continues to be a major problem, demanding attention in the context of demographic changes and migration trends. Business confidence and national sales are expected to grow, according to European Chambers Survey 2024. At the same time, export sales and employment face challenges and call for strategic approaches in relation to improvement.

The main challenges in 2024, indicated by companies in our country, will probably remain the lack of qualified personnel and the increased labor costs, as well as the financial conditions for developing businesses.

Despite the escalating labor and production costs, Bulgarian businesses continue to be confident in their development opportunities throughout 2024, albeit cautiously. The present 19.62% increase in the minimum wage (from BGN 780 to BGN 933) and the general increase of employers' costs per hour by 15.1% in the third quarter of 2023 compared to the same period of the previous year, will result in a significant rise of labor costs. 2024 is expected to be a period of recovery and adaptation to the new economic realities, focused on the expansion of the domestic demand and the management of labor market and investments. Global risks, including geopolitical and energy instability, continue to affect Bulgarian economy. In this context, it will be of particular importance to undertake vital measures to address foreign trade issues and minimize geopolitical risks.

In conclusion, despite the challenges, Bulgarian businesses step into 2024 with positive expectations, looking forward to sustainable economic development, supported by strategic initiatives and policies. According to data from the NSI, the labor market in Bulgaria in 2023 displayed specific trends in relation to employment and unemployment. Unemployment rate was slightly increased in the first two quarters of the year, reaching 4.6% in the third quarter, which suggested a minor increase in unemployment compared to the end of 2022, when it was 3.7%. On the other hand, the employment rate in the 15+ age group was decreasing, compared to the peak in the fourth quarter of 2022 from 55.4% to 52.9% in the third quarter of 2023. Employment rate in the 20 - 64 age group was stable, maintaining a level of around 75.9% in the last two quarters. These indicators suggested that, despite some fluctuations, the labor market remained relatively stable, with slight variations in employment and unemployment rates. We can expect that in 2024 these trends will continue, with possible minor changes depending on the external economic conditions and the internal political and economic situation in the country.

Referring to data from the 2024 European Economic Survey "Developing and attracting talent and skills to support the twin transition" is one of the leading messages businesses have sent out to the politicians, indicating how important it is to improve the recognition of qualifications and to modernize education in order to meet the current and future demands of labor markets in the EU, which is crucial for the success of the twin green & digital transition.

The main communication of the 6th edition of EPP /European Parliament of Enterprises™ is still another confirmation of the above: Dealing with the chronic labor shortage by upskilling and reskilling European workers.

According to the latest BNB macroeconomic forecast, compensation growth per employee is expected to be 13.9% average for 2023 and slow down to 8.3% in 2024 and 9.1% in 2025 as a result of the envisaged lower inflation. At the same time, the expected increase in real labor productivity for the period 2024-2025 and the aggravation of labor shortages in the country will keep wage growth at relatively high levels for the foreseen period.