World Bank says low productivity threat to economy

The huge income gap between Bulgaria and other EU member states will be perpetuated unless the country improves labor productivity, says a World Bank report made public on September 24, Dnevnik reported on September 25.
If the country continues on its present course over the next couple of decades, it will at best halve the gap and stop there.
Under the more upbeat scenario, Bulgaria could reach parity with average EU income levels by 2040 but only if productivity doubles to five percent and remains steady at that level. At the moment, Bulgarians earn only a third of the income of their counterparts in the rest of the EU while productivity has improved by only two percent since 2002.
The low productivity, inefficient education system and the underqualified labor pool pose a threat to economic growth and the convergence with EU living standards, warns the report. The bank sees the risks in the pace of wage growth which is outstripping productivity growth.
That trend coupled with the low labor mobility and the shortage of workers in some industries enhances the threat of acceleration in the already fast inflation growth and overheating of the economy. Bold reforms will be needed to ensure the best-case scenario for Bulgaria, said the World Bank analysts.
The report identifies as critical four areas - commodity markets, the labor market, the development of human resources and R&D. These are also the areas where Bulgaria is lagging most behind EU average levels. At the moment, Bulgaria spends only one percent of GDP on innovation with most of the funding coming from the public and not the private sector.