1. ASSOCIATE PROFESSOR DR. DANIELA BOBEVA BULGARIAN CONTEXT IN TEACHING INTERNATIONAL ECONOMY

2. OUTLINE: THE THREE “W” Why we need to present the Bulgarian case in lecturing International Economy? What we would mean by “Bulgarian context” ? Where we have to put focus on?

3. MAIN THESIS We need to have in all lectures in International Economy a presentation of the Bulgarian case. The specific Bulgarian context requires also more Bulgarian authors’ publications to be included in the readings and the theoretical basis

4. WHY WE NEED TO PRESENT “THE BULGARIAN CASE”? The international economy course integrates a wide range of subjects and represents a modern view of the way today world economy works. The synergy between the national and international construct the real understanding of the economy. The national economies are more international than ever. A combination of characteristics makes the Bulgarian economy rather specific and nonconventional economy. Students are interested in the implication of international economy theories in Bulgaria. Students need to know the advantages and opportunities and also the risks the international economy creates to Bulgarian market participants

5. WHAT MAKES THE BULGARIAN ECONOMY NONCONVENTIONAL Sustainable monetary regime: 19 years of currency board arrangement Small public sector: Public sector enterprises only 5% of GDP Open economy: 85% of GDP through foreign trade Large foreign investment sector: 75% of financial sector, 60% of mining, 65% of chemical industry, etc.

6. THE BULGARIAN CONTEXT: FOCUS ON: Bulgaria and the currency regime Bulgaria and the euro area. BoP specifics for Bulgaria. The story about high current account deficit FDI and multinational companies in Bulgaria Free trade and Bulgaria The external debt of Bulgaria Bulgaria and the IFIs BG goods on the global stock exchanges Global crisis and the impact on Bulgaria

7. Focusing on the Bulgarian context may challenge the conventional wisdom in international economy theories

8. Stable and rigid monetary regime: 19 years of currency board arrangement without fluctuation and tension Surviving during different stages of the cycle proving sustainability Adjustment through fiscal policy and structural reforms instead of monetary policy Imposing strict fiscal policy and larger buffers against risks Low level of public debt Thesis: Fixed exchange rate regimes are imposed in vulnerable economies and they do not provide with a sufficient level of flexibility LECTURE: INTERNATIONAL MONETARY SYSTEMS

9. Currency board is compatible with ERM II but formally not accepted by the ECB BGN not allowed to the ERM II due to other than macroeconomic considerations Bulgaria is the only country that meets all numerical criteria according to three consecutive convergence reports of the ECB and EC Macroeconomic stability and prudent fiscal policy for more than The single currency has to be adopted only by mature economies where Maastricht criteria are met but also real convergence has to be advanced LECTURE: ECONOMIC AND MONETARY UNION

10. Bulgaria: Ups and Downs Reduction of public debt is difficult but the accumulation is easy Maintaining low public debt for 16 years has not brought sufficient benefits Public debt should be kept small – up to 50% of GDP. LECTURE : DEBT AND DEBT CRISIS

11. Bulgarian economy reached historically highest current account deficits ( 22% of GDP) but Not led to a crisis since driven by large FDI inflows Self corrected for less than one year but “The price” was shrinking FDI Current account deficit beyond 6% is an indication of severe tension and macroeconomic imbalances LECTURE: BALANCE OF PAYMENTS

12. Bulgaria: Highly unstable but large FDI inflows The quality of FDI is a challenge: low value added, low export potential, concentrated in low skilled sectors Small reinvested profit of foreign controlled companies and limited innovation FDI and foreign companies contribute to the growth, exports and innovations LECTURE : MULTINATIONAL COMPANIES AND FDI

13. Bulgaria is a success story for Bretton Woods institutions? After 13 agreements with the IMF the economy is stabilised and restructed, private sector makes 95% of GDP, open economy with a strong FDI impact Fiscal discipline imposed and limited social benefits IFIs may impose policies that create challenges for sustainable growth. Their policies have not proven success in most of the countries of operation LECTURE: INTERNATIONAL FINANCIAL INSTITUTIONS

14. Thank you