How political instability, investment, the labor market, and an unexpectedly strong stock exchange are connected
When the government resigned in December and Bulgaria once again moved toward snap elections, it confirmed a pattern that has defined the country for several years: political instability has become the norm rather than the exception. When the president subsequently resigned in January and signaled the launch of his own political project, it became clear that the country stands at a structural crossroads.
At the same time, something seemingly paradoxical is happening: the Bulgarian stock market has experienced a remarkably strong upswing. This is not a marginal detail—it is a crucial piece of the puzzle for understanding how the economy and politics are currently moving in different directions in Bulgaria.
A political pattern – not a one-off event
Since 2021, Bulgaria has been marked by:
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repeated snap elections
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short-lived governments
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technocratic caretaker administrations
For voters, this has created political fatigue. For the economy, it has produced something more subtle—and more dangerous: unpredictability. Businesses and capital do not demand perfect governments, but they do require rules of the game that hold over time.
The macroeconomy: a stable foundation, low momentum
On a macro level, Bulgaria remains relatively solid:
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low public debt compared with the EU average
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a fixed exchange-rate regime linked to the euro
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limited budget deficits
This is not a crisis economy. However, it is an economy being held back. Reform decisions are postponed, major state projects are frozen, and public institutions become cautious. The result is a waiting-mode economy—stable, but underutilized.
The stock market: a market that does not wait
Here the paradox emerges. While politics stumbles forward, the Bulgarian stock market has shown strong growth. The leading SOFIX index has risen sharply, and trading volumes on the Bulgarian Stock Exchange have increased significantly.
What is driving the rally?
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Euro expectations and financial integration
The market is pricing in Bulgaria’s deeper integration into the EU financial system. Euro adoption is seen by investors as a stabilizing factor—regardless of political noise. -
Undervalued companies
Bulgarian listed companies have long traded at low valuations. For regional and international investors, the market appears overlooked rather than fundamentally risky. -
Capital searching for alternatives
In a period of uncertainty in larger economies, capital seeks smaller, more niche markets where upside potential remains significant. -
Domestic capital awakening
More Bulgarians are placing savings in equities, partly as a hedge against inflation and partly as an alternative to real estate.
What does this really mean?
The stock market’s rise is not evidence that political problems have been solved. Rather, it shows that financial markets look 2–5 years ahead, while politics often gets stuck on the next election.
This creates an unusual situation where capital is running ahead of the state.
Investment: two different logics at work
The same split is visible in investment patterns.
Private capital keeps moving
Investment continues in:
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IT and outsourcing
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fintech
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logistics
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private energy projects
These sectors require minimal state involvement and rely on private contracts.
Public projects slow down
At the same time, investors hesitate when it comes to:
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major infrastructure projects
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public procurement
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long-term state commitments
Here, corruption and political instability become concrete business risks, not abstract concerns.
Small businesses – the invisible loser
Those most affected by instability are not multinational corporations, but small and medium-sized enterprises:
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expansion is postponed
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investment is paused
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hiring decisions are delayed
Large companies can absorb uncertainty. Smaller ones cannot. The result is an economy where dynamism is dampened—even as the stock market performs well.
The labor market: split into two realities
The Bulgarian labor market is moving in two directions at once.
High-skilled sectors
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acute talent shortages
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rapidly rising wages
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strong international demand
The rest of the labor market
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low mobility
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regional stagnation
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weak future prospects
At its core, this is a confidence problem. When people do not see stability or fair rules, they choose to leave.
Brain drain – the cost that does not appear in the budget
When young, educated Bulgarians emigrate:
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the state loses its education investments
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companies lose future leaders
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innovation slows
The stock market may rise—but without people staying, the long-term foundation erodes.
The former president’s political project and the market’s verdict
The former president Rumen Radev has positioned himself as an anti-corruption force. For markets, this only matters if it results in:
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concluded legal cases
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transparent procurement
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institutional reform
Capital does not respond to promises—it responds to implementation.
Sofia, the regions, and the signal from the stock market
The stock market rally primarily reflects companies and capital concentrated in Sofia. The regions do not see the same effects. This risks:
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widening regional disparities
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further centralizing growth
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increasing discontent outside the capital
Without political stability, it becomes difficult to translate stock market gains into broad-based economic development.
Conclusion: two Bulgarias – for now
Bulgaria currently lives in two parallel realities:
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Politics: fragmented, short-term, and unstable
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Financial markets: forward-looking, opportunistic, and optimistic
The strong stock market performance shows that the country’s potential is real. But without stable institutions, the rally risks becoming an isolated success rather than a driver of the wider economy.
Anti-corruption is not a moral issue.
Stability is not a political slogan.
In today’s Bulgaria, both have become economic production factors.
The key question ahead is simple—but decisive:
Can politics catch up with the market before patience runs out?
By Chris...