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Foreign Direct Investments in Bulgaria: Do They Have an Effect on the Economic Development of the Country?

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  • Iskra Christova-Balkanska

Abstract

The article is trying to analyze the benefits of attracting foreign direct investments (FDI) and the supposed effect on the economic development in Bulgaria. The increase of FDI per capita is important for the penetration and absorption of FDI in the economy, as well as for the creation of new jobs. FDI’s accumulation demonstrates the relative increase of the absorptive capacity of the Bulgarian economy. The regressive analysis shows that there is a strong connection between the attracted FDI and the increase of GDP. Despite that FDI are increasing in processing industry and financial intermediation, the last years they are directed to the real estate, building and acquiring industrial, logistic and trade projects or to companies with intermediation or leasing activity. Thought the macroeconomic indicators in Bulgaria are relatively stable, the deficit in the current payment balance is deepening and the attraction of FDI is considered as a source for financial assistance. At present, and regardless of the strong relation between FDI and GDP, it is not possible to affirm that the increase of FDI in Bulgaria is contributing to the development of export-oriented economy. The global financial crisis also is creating an unfavorable economic environment, influencing negatively on the inflows of FDI in Bulgaria and on the economic development.

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Bibliographic Info

Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Studies.

Volume (Year): (2009)
Issue (Month): 1 ()
Pages: 197-213

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Handle: RePEc:bas:econst:y:2009:i:1:p:197-213

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  1. Elina Ribakova & Balázs Horváth & Dimitri G. Demekas & Yi Wu, 2005. "Foreign Direct Investment in Southeastern Europe," IMF Working Papers 05/110, International Monetary Fund.
  2. Henrik Hansen & John Rand, 2006. "On the Causal Links Between FDI and Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 29(1), pages 21-41, 01.
  3. Iskra Hristova-Balkanska, 2005. "The Possible Effects of Foreign Direct Investments on the Southeastern European Countries in the Context of the EU Enlargement," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 95-114.
  4. Valerija Botrić & Lorena Škuflić, 2006. "Main Determinants of Foreign Direct Investment in the Southeast European Countries," Transition Studies Review, Springer, vol. 13(2), pages 359-377, 07.
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Cited by:
  1. Temiz, Dilek & Gökmen, Aytaç, 2014. "FDI inflow as an international business operation by MNCs and economic growth: An empirical study on Turkey," International Business Review, Elsevier, vol. 23(1), pages 145-154.

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