# I. Introduction

## **Despite recent improvements, Bulgaria continues to have some of the highest levels of income poverty**

**in the European Union (EU).** From 2016 to 2020<sup>1</sup> , economic growth led to improved living standards for the average household and the poorest 40 percent, resulting in a significant decrease in absolute poverty (using the USD 6.85 2017 PPP poverty line). During this period, Bulgaria's economic growth accelerated, benefiting the entire income distribution, particularly the poor, and reducing international poverty by 5.9 percentage points (Figure 1, panel a). Real incomes moved steadily towards the EU average, surpassing 50% of that level. In 2021, this trend reversed, with poverty increasing by 1.2 percentage points due to the pandemic's lingering effects, the expiration of temporary COVID-19 measures, inflationary pressures, and a decline in employment among less-educated individuals. Despite these positive trends, poverty levels remain high by EU standards (Figure 1, panel b).  Moreover, the anchored at-risk-of-poverty (AROP)—the proportion of individuals with income less than 60 percent of the national median equivalized disposable income (after social transfers), anchored using the 2019 threshold —followed similar trends3 (Figure 1, panel c). Substantial declines in poverty are also observed when using higher poverty lines.  Despite the recent economic slowdown, incomes grew rapidly among the bottom 40 percent of the income distribution (6.6% average annual rise over 2016-2021) and even faster among the bottom 20 percent (7.4% average annual rise), outpacing the median household income growth rate (5.8% annually).

**In addition to high rates of monetary poverty, the country has consistently reported high measures of non-monetary poverty; the incidence of energy poverty and food insecurity is also high for EU standards.** On all the measures of economic strain, Bulgaria consistently ranks higher than the EU-27 average. Consensual indicators of energy poverty show high levels for EU standards, with about 22.5 percent of households in Bulgaria being unable to keep their homes warm in 2022, the highest rate in the EU. The proportion of individuals reporting economic strain is most pronounced among households in the lowest income quintile, with reports as much as 11 times higher than households in the wealthiest income quintile (World Bank, 2021). Even before COVID-19 and the Ukraine crisis, food insecurity was persistently high. Bulgaria ranks 29th of 113 on the 2022 Global Food Security Index.<sup>2</sup> Though there have been some improvements in food insecurity since 2012, the country ranks behind other countries in the EU.

**Figure 1. Poverty decreased during the pre-covid-19 period, but levels are still high for EU standards**

> (a) Income-based poverty rate, upper-middle income (UMI) poverty line ($6.85 per day, 2017 PPP), Percent, 2006-2021

b. Income-based poverty rate, upper-middle income (UMI) poverty line ($6.85 per day, 2017 PPP), Percent, Selected EU countries, 2021

> 1 These estimates were produced by the World Bank using 2017-2022 EU Surveys on Income and Living Conditions. (EU-SILC). No more recent estimates of absolute poverty are available.

> 2 It is only among the moderate-performing countries compared to the rest of the countries in the region. It performs significantly better than Romania, which ranks 45, but worse than Poland, which ranks 21.

2