Overview
Bulgaria is making strides in digital transformation focusing on improving its e-government services for the citizens, its digital infrastructure, cybersecurity, digital education and overall digitalization of both public sector and private companies. The EU is also supporting businesses, national and local governments, research, cross-border digital services, and workforce development in emerging digital sectors such as AI, advanced computing, Internet of Things (IoT), smart cities, fintech and e-commerce. Cybersecurity also remains a priority, with efforts underway to build a resilient infrastructure and secure digital environment.
The ICT sector, which is the founding factor of the digital market, is a key driver of Bulgaria’s economy. Bulgaria has a long, rich tradition in the IT and electronics sector (dating back to the Communist era). Bulgaria is known as the Silicon Valley of Southeastern/Eastern Europe. It is home to approximately 10,000 ICT companies. According to Eurostat, 126,100 ICT specialists were employed in Bulgaria in 2023, or 19 per 1000 capita.
Bulgaria’s ICT industry is bolstered by low corporate tax rates and a focus on cloud services and mobility. New opportunities are growing in the Bulgarian digital economy as Bulgarian companies work to increase their competitiveness in the EU, and as the Bulgarian government complies with EU directives and legislation concerning its digitalization. The ICT footprint in Bulgaria’s economy is constantly growing, making it one of the most profitable sectors in the country.
However, challenges remain, including low levels of digitalization in government and private sector; opaque and complex public procurement processes with the participation of non-trusted vendors; a digital skills gap; limited broadband coverage; and significant portions of the population lacking internet access or digital literacy.
Challenges
The EU digital economy is highly regulated. U.S. companies operating in Bulgaria must be compliant with these requirements and regulations. Here is a non-exhaustive list of legislative acts that are relevant:
The EU General Data Protection Regulation (GDPR) applies in Bulgaria. It protects the personal data of individuals when processed by private and public organizations. In addition to the GDPR, Bulgaria has implemented the Personal Data Protection Act, which was recently amended to align with GDPR requirements. Companies handling significant amounts of personal data in Bulgaria must comply with GDPR rules when processing or transferring data. Data localization is regulated by both national legislation and EU directives.
AI regulations in Bulgaria are primarily influenced by the broader EU regulatory framework. In December 2023, the EU Council and the European Parliament reached an agreement on the world’s first AI rules. The EU’s AI Act entered into force across in all 27 EU Member States, including Bulgaria. The Act aims to comprehensively regulate the use and development of AI across the EU Member States now. As next steps, Member states will appoint competent authorities.
Bulgaria’s approach to cybersecurity has evolved significantly in recent years. The new requirements for cybersecurity in Bulgaria are shaped by both national legislation and EU directives, most notably the Network and Information Security (NIS) and its successor, the NIS2 Directive. NIS2 aims to increase the level of cyber resilience across EU countries, requiring providers of public services to implement technical and operational measures to manage network security risks. The new rules apply for the following sectors: energy, transport, banking, healthcare, digital infrastructure, public administration and space technologies. The Digital Services Act, part of the EU Digital Strategy, is Bulgaria’s online harms legislation. It aims to combat harmful online content, ensuring data protection and protecting users from various forms of digital threats.
Public-sector procurement is often complex and opaque. In addition to the slow-moving government administration, this is a major challenge. Lack of funding, lack of high-speed internet access, lack of expertise in implementing integrated tech solutions, lack of digital skills and tech education are slowing down digital transformation and limiting the overall competitiveness of the Bulgarian economy. While Bulgaria has made significant strides in improving its digital economy, particularly in urban areas, there are still gaps in rural and remote regions. High-speed broadband access is unevenly distributed, which limits the ability of businesses and individuals in these areas to fully participate in the digital economy. Insufficient funding is also an obstacle.
Digital Trade Opportunities
Bulgaria is a well-developed tech destination and a growing tech hub in Eastern/Southeast Europe. The Bulgarian IT industry keeps up with the latest technological trends and innovations worldwide. Despite government instability caused by political parties unable to forge successful coalition governments, Bulgaria offers an attractive business climate for tech companies. The mixture of access to reasonable prices, strategic location and a high-quality talent pool makes Bulgaria an attractive digital destination. Bulgaria is a global player in software development, offering high-quality solutions in finance, healthcare, logistics and gaming. After 17 years of EU membership, the software business in Bulgaria is the best-performing sector in the ICT industry. Bulgaria’s low and flat corporate tax rate of 10 percent attracts many ICT companies. Despite some progress, there is a need for digitalizing both the public sector and private-sector businesses. The move toward cloud services and mobility positively shaped Bulgaria’s IT landscape, creating an anticipated annual increase in IT expenditures.
Bulgaria performs slightly better than the EU average when it comes to coverage of high-speed broadband in urban areas. However, rural areas are not well covered, with only 17 percent having high-speed broadband network available. Bulgaria recently enhanced its supercomputer capabilities. As a result, the country has a growing role in the European and global computing landscape. The most notable development is the establishment of the Petascale Supercomputer in Sofia, which is housed in Sofia Tech Park, a hub that supports the growth of small and medium businesses by providing know-how, networking opportunities and access to new technologies. The Supercomputer is part of the European High-Performance Computing Joint Undertaking, a collaborative initiative aimed at developing a world-class supercomputing ecosystem in Europe.
The Bulgarian Academy of Science operates another supercomputer. It is intended for cutting-edge scientific research in artificial intelligence, climatology, bioinformatics, pharmaceuticals, high-tech material development, dynamic process modeling and data analysis.
The Bulgarian government developed its first AI strategy with a goal to support the digital transformation of the economy. Currently, AI is used mainly in software development and IT services, financial services, education, e-commerce and big data. Very few private-sector companies use AI in their processes. The fintech market is rapidly evolving, with significant growth in digital payments, investment, capital raising, digital assets, and neo banking.
The cybersecurity sector in Bulgaria is poised for steady growth in 2024. U.S. cybersecurity companies can benefit from demand in the Bulgarian market for expertise on overall cybersecurity solutions, consulting, and system integration; cybersecurity awareness training; incident response planning; risk assessments; and compliance consulting. They can also offer secure cloud storage; cybersecurity for IoT devices; identity and access management, and data encryption solutions for Bulgarian companies.
Information Services, the national system integrator, is leading the way in implementing Bulgaria’s first Security Operation Center (SOC), which will be followed by many other SOCs. Bulgaria has already implemented major cybersecurity and tech projects at the Ministry of e-Governance, Ministry of Foreign Affairs, Ministry of Interior, the National Revenue Agency, and the Land Registry Agency. The national system integrator has implemented one of the world’s leading National Health Information Systems and has initiated first steps towards e-justice.
According to Statista, the IoT market in Bulgaria is rapidly growing, projected to reach $684.40 million in 2024 and expected to rise to $1,081 million by 2029, with a 9.57% annual growth rate. Large Bulgarian cities such as Sofia, Varna, Burgas, Plovdiv and Vratsa have implemented smart cities initiatives for intelligent traffic management, smart lighting, IoT sensors for air-quality monitoring, smart grid for energy management, and waste-management systems aimed at enhancing urban efficiency and reducing environmental impact. However, smaller Bulgarian cities have not implemented such projects. The Bulgarian government, with EU backing, has launched initiatives to promote IoT and smart cities. EU funding supports the modernization of urban infrastructure and the integration of IoT in public services, with a national strategy focusing on digital innovation and sustainable urban development. Unfortunately, available EU funding is underutilized.
IoT technologies are being used by a limited number of farmers in precision farming to monitor soil, weather and crop conditions, improving yields and reducing environmental impact. Bulgaria has a well-developed telecommunications sector, offering extensive 4G and rapidly expanding 5G networks. The country ranks high in internet speed, supported by significant investments in fiber-optic infrastructure that ensure widespread access to high-speed internet. Certain rural areas still lack access to broadband internet, however.
DIGITAL ECONOMY – related trade events
- Webit 2024 | Sustainable AI Future for Humans & Robots October 23, 2024, Sofia, Bulgaria
- SEE ITS Summit 2024 November 7-8, 2024, Sofia, Bulgaria
- CyberSecurity Forum - 2024 November 21, 2024, Sofia, Bulgaria
Additional Resources
U.S. Department of Commerce, International Trade Administration, Industry & Analysis Office of Digital and Emerging Technology Service (DETS)
National Trade Estimates Report – Digital Trade Barriers
United States International Cyberspace & Digital Policy Strategy - United States Department of State