Adrian Nikolov from IME examines the purchasing power of Bulgarians over the past decade.
Data on income, consumption and poverty outline a picture of growing well-being over the past years, not impoverishment. Real incomes and purchasing power of households are increasing, and the structure of expenses is gradually shifting from basic needs to more spending on leisure, culture and education. At the same time, poverty and inequality remain a serious problem, but are increasingly concentrated in certain vulnerable groups. This clearly demonstrates that social policy must be targeted more precisely at people at the highest risk, writes the economist, quoted by FOCUS.
The real income index – in other words, the change in average income minus inflation, which measures the change in purchasing power, has been growing at a steady pace over the past decade.
We can clearly distinguish three periods – relatively slow linear growth until 2021, a temporary slowdown due to double-digit inflation in 2022, and a distinct acceleration of growth in the last two years: between 2023 and 2024, the increase in real income is 13%, between 2024 and 2025 – 12%. This once again emphasizes the conclusion that not only is it untenable to talk about impoverishment (and, accordingly, to think of measures to deal with it), on the contrary – Despite significant inflation over the past five years, households can afford almost twice as many goods and services as they could a decade earlier.
This process is also associated with a gradual change in the structure of household spending. Food now accounts for 29.3% of total spending, a decrease of 1.5 percentage points compared to 2016 – i.e. Bulgarians spend less on food despite the outpacing inflation in food products. Despite the significant growth in real estate prices and rents, total household spending (including overheads) has decreased from 14.3% to 10.7%. Conversely, there has been an increase in the share of spending on leisure, culture and education in household budgets. There is also a significant increase in the share of taxes and social security contributions (to a total of 15.4% of expenditures), which reflects the increase in wages, high employment and record low unemployment.
More moderate optimism comes from the data on poverty in 2025. The share of the poor remains above 21%, but due to the decline in the population, the number of people below the current poverty line is 1.369 million people, which represents a nominal decrease even compared to 2022, when the number of the poor was over 1.55 million people. It is important to note that the poverty line (442 euros for 2025) is growing at a rate above annual inflation, which means that the purchasing power of households around the poverty line is increasing. Reason for moderate optimism is also the gradual decline in inequality indicators, although the country remains among those with the highest income inequality within the EU.
The main factors behind poverty remain unchanged. The share of the poor among the Roma is approaching 2/3, while among Bulgarians it is clearly below the national average - 15%. Among people with primary and no education, the poor are approaching 50%, and among the unemployed it is 55%. These three factors - successful participation in the labor market, education and failed Roma integration - largely determine the dynamics and distribution of poverty in our country and, together with the outpacing growth of incomes of the upper income groups, shape inequality.
The snapshot of income, purchasing power and poverty provides a clear direction for the necessary changes in social policy in the immediate future. There are no arguments for measures to support consumption or price interventions, especially those aimed horizontally at the entire population; moreover, they create a risk of additional inflation. However, there remains a need to reformat the social assistance model towards better targeting of spending through profiling and assessment of real needs – this should be a priority for the team of the future Minister of Social Affairs. The specific steps towards this are, in general:
– Unifying basic benefits into a single income support — monthly social benefits, heating and part of family benefits to be assessed according to a common criterion: household income.
– Dividing support into two clear vectors — the first to be universal support against poverty and material deprivation, and the second — support for people with specific needs, for example the need for care, independent living or additional funds related to health.
– Fuller integration of services, personal assistance and cash transfers — the system should start from an assessment of the needs of the individual and household, then offer a combination of social services, personal assistance and financial support; at the local level this means a single point of contact and more services in the home and community.