The high-tech outsourcing sector in Bulgaria recorded another year of

The high-tech outsourcing sector in Bulgaria recorded another year of growth. In 2022, a record 105,000 people were working in that industry, and on an annual basis, an increase in revenues by 16.8% (to almost 5 billion euros) was reported. Momentum is slowing, however, and factors behind this include both global economic and geopolitical uncertainties, as well as domestic troubles related to fiscal policy unpredictability and lagging education. And all this happens against the background of a severely limited labour market.

These findings were presented on Wednesday, during the Association for Innovation, Business Services and Technology (AIBEST) annual report for 2022. Figures show that a total of 802 companies operated in the Bulgarian outsourcing sector last year: 360 were BPOs (outsourced business operations), 416 - ITOs (outsourced technological services), and 23 were engaged in development activities.

Together, they generated revenues for a total of 5.8% of the country`s annual gross domestic product (GDP). The forecast for 2025 indicates that, if the average growth in the sector of the last 5 years is maintained, its revenues will reach 9.2% of GDP.
Slower growth
However, the worsening situation suggests a slowdown in business. The sector expects that as early as 2023, growth will shrink to single digits. For comparison, in 2021 the outsourced services industry registered an increase in revenue turnover by 22.4%; in 2020, this figure was 11.2%, and in 2019 – 19.6%.

Following double-digit growth of nearly 17% in 2022, our forecast for the development of the sector in 2023 is more conservative. We will continue to increase our share in the gross domestic product of Bulgaria, but the real growth of the sector will be expressed in a single-digit percentage ", commented Iliya Krastev, chairman of AIBEST.

It appears that the cooling of the tech sector this year will continue into 2024. The forecast for the outsourcing industry - while remaining positive - is for a lower growth rate. Iliya Krastev outlined the situation as follows:
On the one hand, there is the geopolitical situation and the many conflicts around the world that create uncertainty among investors;On the other hand, there are the global economic processes – the high-interest rates, as well as the recession, which is already evident in some major markets;At the local level, the problems are no less significant: Political instability, lack of a clear strategy in Bulgaria for the development of priority sectors, tax unpredictability and, last but not least, low-quality education with an extremely limited labour market.
In the long term, all this can lead to stagnation in the development of the technological sector, and also to the exit of companies from the Bulgarian market. "

Despite the slowdown, there is a significant increase in employment rates in the sector. In just one year, 15,000 employees have started a job there, bringing the workforce to almost 105,000. The increase comes after another 10,000 people were recruited in 2021. According to the report, there are hirings in all divisions of the outsourced services industry.

The total labour cost, including salaries and social security, increased by 25.9% in 2022 and amounted to just over 3 billion euros. The year-on-year growth in taxes paid is even higher - 26.5%, equaling 71.2 million euros.

" It is necessary for the government to invest in the creation of a “Bulgaria brand ” - a destination worth moving to with your family. We need to have a strategy on how to attract labour and how to retain our highly qualified personnel. Attracting people and expanding the limited labour market is more important than attracting investors because without education and qualified people the high-tech sector cannot grow ", commented Dobroslav Dimitrov, chairman of the Bulgarian Association of Software Companies (BASCOM).

Translated by Tzvetozar Vincent Iolov