Bulgaria’s Economic Growth to Slow in 2025 Amid Inflation and Weaker External Demand
Brussels, The Gulf Observer: Bulgaria’s economy is expected to grow at a slower pace in 2025, with GDP projected to rise by 2%, down from 2.8% in 2024, according to the European Commission’s Spring 2025 Economic Forecast. A slight improvement to 2.1% is anticipated in 2026, driven by stronger public investment and gradual recovery in exports.
The economic outlook is shaped by a mix of domestic constraints and external headwinds. Rising inflation, indirect tax hikes, and increased utility and energy costs are expected to dampen private consumption, while weaker external demand and market competition weigh on exports. However, EU fund absorption is forecast to boost public investment, even as private investment is set to decline amid lingering uncertainty.
In 2024, growth was largely driven by private consumption, underpinned by wage gains, employment growth, and social transfers. Yet, exports dropped sharply—by nearly a third—due to reduced trade with Ukraine, Russia, China, and the UK. Investment contracted by 1.1%, reflecting lower public spending and inventory accumulation.
The labour market remained stable, with unemployment near 4%. Nominal wage growth, which began at 13.8% in early 2024, cooled to 4% by year-end. While moderate wage increases are expected to continue in the private sector, public sector wages are set to rise more robustly in 2025 amid increased hiring.
Inflation, which slowed to 2.6% in 2024, is forecast to rebound temporarily in early 2025 due to VAT hikes, higher tobacco excise duties, and elevated food and utility costs. The HICP inflation rate is projected to average 3.6% in 2025, easing to 1.8% in 2026, in line with broader EU trends.
Bulgaria’s general government deficit rose to 3% of GDP in 2024, reflecting increased pensions, wages, and social spending, as well as legacy infrastructure liabilities. The deficit is expected to narrow to 2.8% in 2025 and remain at that level in 2026, supported by fiscal consolidation measures and tax reforms. The debt-to-GDP ratio is projected to rise to 25.1% in 2025 and 27.1% in 2026.
