The IT industry in Bulgaria is set to end 2024 without any growth in employment numbers and with decreasing revenue growth, according to Iliya Krastev, chairman of AIBEST. During the annual report presentation, he noted that the country’s lack of a functional government and clear economic vision has led neighboring nations to capitalize on this instability. As a result, Bulgaria is increasingly being viewed as an unsafe destination for investors, with foreign businesses and capital flowing to countries like Greece, Romania, and others in the region.

Bulgaria, which had once been a hub for tech companies, startups, and venture capital funds, is seeing its competitiveness waning. Krastev highlighted a marked decline in foreign investment, with the surrounding countries becoming more proactive in attracting business, often using Bulgaria's instability and unpredictability in their marketing to potential investors. They emphasize concerns over the country's regulatory and tax policies, as well as the deterioration of its education system.

Yordan Ginev, Managing Director for Bulgaria at Digitall, added that businesses in the IT sector typically finalize their budgets by October and are often caught off guard by late changes in taxes and regulations. He pointed out that such practices are particularly harmful in a country like Bulgaria, where policies seem to shift unpredictably. Krastev argued that the government’s failure to address these challenges stems from the IT sector’s lack of political visibility, making it less of an electoral concern despite its strategic importance.

In light of these issues, the industry is making a renewed push to gain recognition through its organization, AIBEST, to be included in national decision-making bodies like the Council for Tripartite Cooperation. Although a similar effort failed previously, a resolution on the new attempt is expected by mid-January. The sector is striving to secure a voice in shaping the country's future economic landscape, emphasizing that high-tech development is essential for any long-term economic growth, including in tourism or agriculture.

The IT sector has long relied on Bulgaria’s advantages of low taxes, affordable wages, and fast internet, but these attributes no longer hold true, according to Krastev. He pointed out that many EU countries now offer similar or better tax incentives for the tech industry, reducing Bulgaria’s attractiveness as a destination for investment.

Another key issue raised by the sector is the lack of effective evaluation of government spending, particularly in education. While around 4% of GDP is allocated to the sector, there is no assessment of its impact. Data shared by AIBEST shows that only a small fraction of high school students take the mathematics exam, and the country continues to perform poorly in international assessments like PISA. The ongoing focus on a few students who excel in math Olympiads does little to address the broader systemic challenges, with most top students leaving Bulgaria for education and work opportunities abroad.

In addition, the IT sector faces a severe shortage of skilled staff, with companies like Digitall planning to hire hundreds of new employees in the coming years, exacerbating competition for talent. Petar Sharkov, CEO of Telerik Academy, highlighted that while thousands of students are educated annually, most of them choose to leave the country after completing their studies, indicating a significant brain drain that undermines efforts to develop a skilled workforce in Bulgaria.

The combination of regulatory instability, a lack of investment in education, and a shortage of skilled labor paints a concerning picture for Bulgaria’s tech sector, which is struggling to maintain its once-promising position as a regional leader. The outcome of upcoming policy decisions and governmental actions will be crucial in determining the future of the industry.

Sources:

• AIBEST
• Dnevnik