Stagnation in the German economy has a bad effect on Bulgaria as well. Subsidiaries of German companies in the country are worried about their future and are looking for new markets, writes "Berliner Zeitung" and gives two examples from Plovdiv.
Krasen Krastev has been leading “Mekalit Bulgaria” for almost 12 years. in Kuklen, near Plovdiv – an enterprise specializing in the production of plastic components and systems for various industries, including the automotive industry, household appliances and electronics. The products of “Mekalit”, a subsidiary of the German “Mekalit Group” from Lichtenau, Baden-Württemberg, are used by a number of renowned brands such as Bosch, Mille, Liebherr, but also Porsche. and “Audi”. And since a large part of the company's customers are in Germany, its success is closely related to the state of the German industrial sector, writes “Berliner Zeitung”.
In recent years, the Bulgarian industry has been developing thanks to the profitable bilateral cooperation with Germany, comments the publication and gives examples: today Germany is Bulgaria's largest trading partner: in 2023, Bulgarian imports from Germany amounted to 6.1 billion euros (12.4% of total imports), and exports from Bulgaria to Germany exceeded six billion euros, i.e. 13.7 percent of the total. Between 2013 and 2023, trade between the two countries increased by 120 percent, the newspaper reported.
Decline in exports to Germany by almost 10 percent
But now Germany is facing a recession, which makes Krastev worry about the future. The German automobile industry is at a standstill, and the consequences of this are also felt in Bulgaria - last year the value of Bulgarian exports to the Federal Republic fell by 9.5 percent.
Those companies in Bulgaria that are part of global supply chains, especially for car manufacturers, are particularly affected. “The automotive industry was hit hard by the rapid transition to electric mobility, which, however, after the initial boom did not meet expectations”, explains to “Berliner Zeitung” I baptized. And to this is added the fierce competition from China.
Competition from China and high energy prices
As Krastev points out, in China, for example, it is possible for a car to be manufactured entirely in a single location, with logistics and parts manufacturers located no more than 100 km from each other. “With its decentralized production model, the EU simply cannot remain competitive,” says Krastev.
Increased energy prices are also having an impact. “They literally doubled in a day”, says Krastev, and “Berliner Zeitung” adds that electricity prices in Bulgaria have increased a lot at the beginning of 2021 along with the general European energy crisis.
Although the full liberalization of the Bulgarian energy market has not yet been completed, the transition to market prices for the industrial sector has already begun and is leading to a serious increase in costs. Combined with increasing pressure on wages, this has meant that Mekalit has had to change its prices on several occasions.
You either diversify or you die
According to Krastev, the orders of many companies in Bulgaria are currently declining or being completely refused, and when this is done by a company other than or even the only customer, it is clear that there is a serious risk for it, Krastev explains to “ Berliner Zeitung“.
„We minimized the risks and diversified our list of end customers”, notes the director, who emphasizes that today the market requires diversification more than ever: “You either diversify or you die”, he says through the publication.< /p>
Despite the crisis: growth is possible
A policy of diversification has long been followed by another company in the same area – the subsidiary company of the German concern “Bulde“. Metal components and mechanical building elements for various industries are produced there: from glass facades and metal structures to railings and sun protection systems. In difficult times, the Bulgarian branch of the company not only managed to withstand the economic stagnation in Europe and the decline in the German economy – it even grows.
„In the last year, our enterprise has grown by 20 percent and we are planning another increase of 20 percent”, tells “Berliner Zeitung” Margarita Stoichkova, manager of "Bulde" - Bulgaria. The company is profiting especially from the significant rise of the construction sector in Bulgaria. Stoichkova shares Krastev's opinion that the key to survival is diversification.
Moreover, it is a country like Bulgaria, whose economy is extremely strongly dominated by small and medium-sized enterprises. Nearly 76% of Bulgarian workers are employed in small and medium-sized enterprises, which is significantly more than the average level for the EU (67%), the publication also commented.