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Bulgaria outperformed only SEE-5 economies, not a great achievement considering that civil wars and violence affected most of them. Their aggregate share in EU imports in 2003 stood at the same level as almost a decade ago in 1994. In terms of cumulative annual changes in growth rates in 1994-2003, Romania scored 120 percentage points, CEEC-8 scored 79 points, Bulgaria 59 points and SEE-5 only 10 percentage points.

# **E** _. Concluding observations_

The period following launching of the stabilization-cum-transformation program in 1997 has three characteristics. First, it has witnessed continuation of an unavoidable shift away—which began in 1999—from the reliance on Eastern markets excluding former Central European members of the EU. The significance of the latter in Bulgaria’s trade has been on the increase. Second, exports of goods rather than services have been the driver of export expansion. The share of services in total exports slightly contracted over 1999-2003, although this might be due to their systematic underreporting in foreign trade statistics all over the world. Third, considering the depth of contraction during the crisis phase, the rebound in exports was relatively modest. It appears that improved, duty-free access to markets for industrial products taking around 80 percent of Bulgarian exports of goods is yet to produce tangible positive effects. This is the price that the Bulgarian economy continues to be paying for flagrant economic mismanagement in 1990-96.

## **3. Commodity composition of trade and the degree of processing**

Questions addressed in this section boil down to the following: What do the changes in import demand tell us about the pace of industrial restructuring? What do the changes in exports depending on the degree of processing embodied in exported products tell us about Bulgaria’s industrial capacities? What characteristics do new star performers embody in terms of technology and the degree of processing?

# **A** **_._** _Changes in the composition of imports_

The composition of imports in terms of end-use product categories sheds light on changes in the domestic demand for various goods depending on the extent of their processing. Thus, for instance, the increase in imports of machinery usually points to the ongoing industrial restructuring effort. In a similar vein, the increase in automobiles and parts may be in part related to the emergence of firms specializing in production of parts or automobiles. In contrast to machinery, this would call for in-depth investigation of imports.

Table 10 provides information on Bulgaria’s imports by end-use product categories from the world, pan-European partners (EU-25, EFTA, Romania and Turkey) and ROW together with their composition from each source. It also provides information on the change in the value of imports between 2003 and 1998. The reason for the selection of 1998 as a base year is that 1998 market the first year that imports rebounded as well as it was the initial period for Bulgaria’s second attempt to move swiftly to an economy based on competitive markets. A cursory examination leads to the following observations: First, other consumer goods, or final manufactures, now account for more than half of Bulgaria’s total imports in large part due to the significant decline in imports of fuels. Their imports in terms of value stood at 44 percent of their level in 1998. Other consumer goods and automobiles and part recorded the largest increases between 1998 and 2003.

Second, there are two indications of an ongoing industrial revival—continuing expansion of imports of industrial raw materials, which increased in line with total import demand growth, and the increase in the share of machinery in total imports. The value of these almost tripled between 1998 and 2003 and was 89 percent higher than in 2000.