Agricultural production in Bulgaria: the financial impact of credit, subsidies, and interest rates

The present study analyses the impact of external bank financing on agricultural production in Bulgaria from 2000-2022. The main objective of this research is to assess the role of external funding in the development of the agricultural sector in the Republic of Bulgaria by examining the influence of bank lending on Bulgarian agricultural production, evaluating the impact of subsidies on the formation of the value of Bulgarian agricultural production, and investigating the significance of interest rates for Bulgarian agricultural production. For this study, three hypotheses have been formulated to be subsequently tested and discussed. A multiple regression analysis has been employed to identify the relationship between agricultural production, lending, sector subsidies, and interest rate levels. The study is based on Eurostat, FAOSTAT, and the Bulgarian National Bank (BNB) data. The results show that the three indicators examined are strongly related to agricultural production and explain a significant part of its dynamics. It has been found that agricultural lending and the interest rates at which farmers have access to financing exert a strong positive influence on the growth of agricultural production. At the same time, subsidies have a negative effect. As a result, the article recommends expanding financial instruments for agricultural credit, improving lending conditions, lowering interest rates for investment loans in the agricultural sector, reviewing subsidy distribution mechanisms, and channeling financing towards areas that enhance productivity and sustainability in agriculture. Keywords: agricultural production, credit, subsidies, interest rate