Issue 7, 2023

The paper examines the current state and development of the Bulgarian economy in 2022 and the first quarter of 2023 considering domestically determined and regional factors and processes. We analyse the real sector of the Bulgarian economy by tracing the dynamics of economic activity (GDP, inflation, and unemployment) considering internal and external factors affecting inflation dynamics and labour market processes. The sustainability of the fiscal sector is viewed through the possibilities of financing the green and digital transition using EU funds and programmes, and the policies needed to preserve the fiscal stability. Prospects for foreign trade are discussed in terms of the economic situation and expectations of Bulgaria's main trading partners, considering the high connectivity with the euro area and the structural specificities of foreign trade relations. The analysis of the financial sector (banking sector and capital market) focuses on the implications of the monetary policy pursued by the European Central Bank and the regulatory actions of the Bulgarian National Bank, as well as on the risks for the stable functioning of the sector in a dynamic macroeconomic environment. Expectations and forecasts for the Bulgarian economy to 2025 are based on key assumptions about the global economic processes and locally determined challenges. Recommendations are made to the national economic policy aimed at preserving the purchasing power of the population's income and the need to restructure certain fiscal measures.
Keywords: economic dynamics; labour market; fiscal sustainability; foreign trade; banking sector; capital market; macroeconomic projections; economic policy recommendations
JEL: E2; E44; E47; E60

This study aims to empirically examine the mediating effect of investment on the relationship between democracy indices (i.e., civil freedom, political freedom, and democratic institutions) and economic growth across 33 provinces in Indonesia over the period from 2012 to 2020. Using a dynamic panel data regression of the Generalized Method of Moments (GMM) within the path analysis framework, the study found that investment, political freedom, and democratic institutions have promoted Indonesia’s economic growth, while civil freedom has deteriorated the economic growth of the country. In addition, investment has partially mediated the effect of the democracy indices on Indonesian economic growth. These results suggest the importance of providing more political freedom and democratic institutions and limiting civil freedom to promote investment and consequently boost economic growth.
Keywords: Democracy indices; investment; economic growth; regional development; Indonesia
JEL: C33; O43; O47; R10; R50

The increasing uncertainty and turbulence of the external environment create new conditions for achieving global leadership. The study aims to conduct a comparative assessment of the economic, scientific, educational, and digital potential of the BRICS countries under conditions of uncertainty to identify opportunities to strengthen their leadership position in the global economy. The article presents the author's vision of the causes and factors of increasing uncertainty and its impact on modern states. The article proves the hypothesis that the BRICS countries are increasing their economic, scientific, educational, and digital potential in comparison with the developed countries of the G7. It concludes that the BRICS countries are superior in economic potential and lag in terms of scientific, educational, and digital potential. It is argued that the uncertainty and turbulence caused by the 2020-2021 pandemic helped the BRICS countries to increase their potential and align their positions with the G7 countries. The identification of the strengths and weaknesses of the BRICS national economies allowed the authors to identify their points of growth in the implementation of the outperformance strategy. It was determined that the most appropriate development strategy for the BRICS countries under conditions of uncertainty is an ambivalent adaptation strategy that allows them to increase their influence in the global economy.
Keywords: BRICS; emerging economies; G7; socio-economic uncertainty; turbulence; crisis; adaptation and development strategy; economic potential; scientific and educational potential; digital potential; global leadership
JEL: F01; F02; F62; F63

Development of the technologies is a part of the modern world and modern business.
The realization of extended changes, that have been imposed by Industry 4.0, is a very serious challenge for enterprises and in most cases have a high-risk ratio.
The goal of this article is to define the main risk components forming the risk frame of Industry 4.0 implementation in enterprises in Bulgaria. In this relation, research has been made, giving the opportunity for a definition of the already mentioned components of the risk frame.The research has been made on the basis of a questionnaire survey, covering 91 enterprises in Bulgaria. On this basis, eight main components are defined, which mainly determine the risk framework for the implementation of Industry 4.0 in enterprises in Bulgaria. A number of weaknesses and omissions have been outlined, which confront the realization of Industry 4.0 in Bulgarian enterprises. The risk variation in these components has also been studied, covering six risk areas identified as key risks in the researched enterprises. All this determines the current level of a significant part of enterprises in Bulgaria in the field of implementation of Industry 4.0 and also provides guidelines for taking measures to limit the impact of risk.
Keywords: Industry 4.0; Risk; Risk frame; Enterprises in Bulgaria
JEL: M15; О14; O33; О38

This article interprets data from several empirical studies in Bulgaria in three areas of research interest – transformational leadership, adaptability, and organizational performance. The first study examines transformational leadership's influence on adaptability and organizational performance. It formulates two hypotheses and tests them by using data from a broader study on organizational capacity for change among employees and managers in organizations in Bulgaria. Two hierarchical regression analyses confirm the direct and positive influence of transformational leadership on adaptability and organizational performance. Results from an additional set of research studies are used to expand the context for understanding and exploring the three areas of interest. The empirical data for these were collected through five observations on the national and organizational cultures according to Hofstede's methodology. Thus, the article’s combined approach of looking at the data from unrelated studies is believed to strengthen the cognitive possibilities in the interpretation of the researched areas and established regularities. The main results point at high values observed for all three variables in Bulgaria. Cultural interpretation of some of the indicators through the years confirm these results and point at unidirectional and stable trends for some (such as growing care for employee development as part of the transformational leadership scale and weakening uncritical following of rules as part of the adaptability scale). There is reason to argue that training is more valuable to employees than job security (both part of the organizational performance scale).
Keywords: transformational leadership; organizational ambidexterity; adaptability; organizational performance; behavioural and cultural reflection
JEL: L10; L29; M10; M14

The current research paper explores some key aspects of the application of the DCF enterprise valuation. This paper presents the second part of a broader study by the authors, which is focused on the analysis of key input variables, predetermining the amount of free operating cash flows as an important part of the application of DCF valuation models. Here are the most serious prerequisites for deviation of forecasts from reality, which often leads to a significant distortion of the final valuations of enterprises. This provokes the research on the interdependence between the five main input variables and especially between operating revenue on the one hand, and the different expenditure groups, on the other hand, is required. In the first part of this research, the relationship between operating revenue and operating expenditures was investigated. In the present research paper, the relationship between operating revenue and gross investment expenditures is investigated, including the increase in net operating working capital and capital expenditures. The research was again carried out on the basis of aggregated data for all non-financial enterprises in Bulgaria for the period 2008-2020. The results are generally ambiguous, but in the medium and long term, at least for some of the largest sectors explored, relatively representative and sustainable averages are established for the relative share of net operating working capital and capital expenditures to revenues. There are no strong arguments against forecasting gross investment costs based on their historical averages as a percentage of operating revenue.
Keywords: company valuation; DCF enterprise valuation model; net operating working capital; capital expenditures; operating free cash flows
JEL: G30; G32

This study aims to explore and understand the implementation of Hulontalo ethnic values in SME's financial decision-making. The determination of informants begins with the decision of the key informant; then, the appointment of informants is developed during field searches using the Snowballing Sampling technique. The informants in this study were as many as nine people. An entrepreneur must have skills in managing his business, expertise in making quality products and implementing the values of Adati Hula-hula'a to Sara'a, Sara'a Hulahula'a to Kuran, which support the theory. There are three implementations of Hulontalo ethnic traditional values in financial decision-making: piyohu, Dilapottitilandingo, and payango. This research was hoped to support the pecking order theory and obtained a new indicator that can be considered for an individual in making financial decisions, namely Daadata Tilapulo (productivity).
Keywords: Culture; Ethnic; the value of entrepreneurship; Capital structure; Financial behavior; Financial Decisions; Decision-making
JEL:  G4; G40; G418

The visualization of the strategic priorities of the universities in the digital space is a key task of academic management in the conditions of a dynamic educational environment and globalization. Proclaiming the official organizational culture on the Internet is essential for improving the image of educational institutions. The purpose of this study is to explore and identify the main priorities when publishing online the organizational culture of higher education institutions, with an emphasis on its primary elements and to reveal their general features, specifics and purpose. It was established that the primary element of utmost importance for universities is the mission and that the least important is the organizational vision. It is concluded that universities should more actively proclaim vision and values in addition to the mission, in order to create a complete portfolio of key elements of the organizational culture and thus build the desired image.
Keywords: higher education institutions; publicized organizational culture; mission; vision; values/principles
JEL: A23; I23

Financial management crises all over the world have demonstrated the need for risk management techniques for businesses seeking to maintain shareholder and consumer support. The purpose of this study is to assess the impact of risk management on the financial performance of commercial banks in the Western Balkans (WB) before and following COVID-19 for the years 2016-2021, with 40 commercial banks selected to represent all WB countries’ commercial banks as a whole. The study revealed that risk management has a significant impact on the financial performance of WB commercial banks as assessed by Return on Assets (ROA) and Return on Equity (ROE). The research was done through the panel regression using fixed and random effect, whereas a dependent variable we have ROE and ROA and as independent variables, we have Solvency risk, Liquidity Risk and Credit Risk and COVID-19 as a dummy variable. Based on the panel regression model, it is found that the four independent variables have a significant impact, in the dependent variable. The results of this study lead us to recommend that central banks maintain strict rules about the minimum amount of equity required or the requisite ratios for deposits and loans. Since credit risk has a detrimental effect on the profitability of commercial banks, keeping a tight eye on lending activities and paying special attention to non-performing loans is also crucial.
Keywords: Banking Sector; credit risk; liquidity risk; solvency risk; financial performance
JEL: G21; G32

Bulgarian agriculture has to correspond with the goals for sustainable growth of food production in order to create and develop more productive, economically efficient and ecological agricultural holdings. Tracking the trends in the development of the structure of the agricultural holdings outlines the current state, the problems and the opportunities in the sector. The aim of the paper is to present the main trends in the structure of the agricultural holdings in Bulgaria in the sector for the period 2000-2020. The paper uses data from the agrarian reports of the Ministry of Agriculture and the last three national censuses of the agricultural holdings of the National Statistics Institute.
Keywords: agriculture; production; trends
JEL: Q10; O13; Q18