Trade relations between Bulgaria and Germany are better than ever. This confirms both the record of record trade between the two countries and the politicians - the recent visit of the German President Frank-Walter Steinmeier to Bulgaria.

According to official data in 2018, the trade turnover between the two countries amounted to 8.266 billion euros, and in the last two years Bulgaria exports more goods than imported from Germany. The difference last year was 320 million euros in favor of Bulgarian exports, and in 2017 - 150 million euros.

German investments in Bulgaria - statistically undervalued

The reversal of the trend comes as a result of the German investments, which are mainly in production. In turn, the produced goods are "returned" back to Germany, but already "with a Bulgarian label". The German-Bulgarian Chamber of Commerce and Industry has published a survey that counts German investments in Bulgaria in the period 1990-2017. According to official data of the BNB, they amount to BGN 6.9 billion, but economists note that there is actually much more.

The analysis, developed in partnership with the Institute for Market Economics, shows that German investments in Bulgaria are at least 25% more or 1.4 billion BGN above. According to IME calculations, official statistics underestimate or overestimate investments depending on whether the ultimate owner invests directly in Bulgaria or makes it through their subsidiaries in other countries.

In order to complete the official data and measure the so-called Indirect German investments, the institute identifies companies with a final owner, a natural or legal person in Germany. Thus, the share of German investment in Bulgaria increases from 6.8% of all foreign direct investment to 8.49%. This makes Germany the second most important source of foreign direct investment in Bulgaria with a share of 8.49% of all foreign direct investment after the Netherlands. Austria remains third with a share of 8.45% by the end of 2017.

Nearly 66% of all indirect German investments covered by the survey are carried out through companies in Austria. Another country, which is experiencing a significant flow of indirect German investment, is Italy - 24%. The Netherlands ranks third with about 10%.

94% of the German investments in Bulgaria (direct and indirect) are concentrated in three economic activities: manufacturing (42%), trade (43%) and financial services (9.3%). According to IME's analysis, German companies have provided jobs to over 1.6% of all employed in Bulgaria or 35.3 thousand people.

In some parts of the country, however, German investments are leading local economies. For example, in Sofia-District, Rousse and Varna, their share of total external investment flows is significant - up to ¼.

Where do the goods labeled Made in Bulgaria go?

Much of the goods produced in Bulgaria travel back to Germany. Therefore, a second analysis of GBIT shows the trade relations, but from the point of view of the German partner. By volume of bilateral trade, Bulgaria is among the top 20 of Germany's most important trading partners within the EU. In terms of trade turnover, Bulgaria ranks 41st among 234 countries and territories in the world with which companies in Germany trade.

Bulgaria has a positive balance with eleven out of the sixteen German provinces. After the country's accession to the EU, there was a slight retreat from the leading position of the light industry. The mining and processing industries (copper and ores of precious metals) are increasingly important for the structure of exports, both to Germany and to the whole. The positive trend of growth is visible especially in the machine building, electronics and electrical, pharmaceutical and chemical industries.

Between 2001 and 2017 the structure of Bulgaria's exports to Germany underwent significant changes. At the beginning of the period light industry products dominated the export to the Federal Republic of Germany, with only garments being 48%. 2010 is the last year in which clothing is the largest commodity group in the export structure (21%), followed by machinery (18%), exports from the mining industry formed only 3% of all exports to Germany.

2011 - there is already a fundamentally new export mix to Germany: the beginning of an export trend for a strong performance of the mining sector (mostly copper exports) and of the machinery (both cars and their parts) - 19 % of Bulgaria's exports to Germany. 2017 - a quarter of exports were generated by machinery, apparatus and electronics, while exports of copper and other metals formed a total of 18.1%. The clothing industry's products registered a drop of only 8.5%.