Economic growth remained solid in 2024 at +3.4%, supported by strong private and public consumption. Investment accelerated in early 2025, helped by improving absorption of RRF funds, although both consumption and investment softened in the second half of the year as public sector spending adjusted to lower-than-planned revenues. Growth momentum is set to moderate over 2026–27 as wage and social transfer growth normalizes and households adjust to easing purchasing-power gains. Private investment should continue to support activity as business confidence improves ahead of euro adoption, while EU funds absorption — which picked up in 2025 — is expected to remain strong across the forecast horizon.

External demand is recovering gradually. Exports contracted in early 2025 due to scheduled maintenance shutdowns at major exporters but resumed growth in H2 and are expected to recover further through 2026–27. Imports will rise in line with domestic demand, further boosted by defence procurement in late 2025 and 2027 as Bulgaria executes large-scale military equipment purchases. As a result, net exports are expected to make a slightly negative contribution to GDP throughout the period. Real GDP growth is forecast at +3.3% in 2026 and +2.9% in 2027.

Labor market conditions remain tight. Strong nominal and real wage growth in 2024–25 — reflecting inflation catch-up, peer convergence and one-off increases in several public sectors — is projected to slow as inflation pressures ease and fiscal constraints limit public pay. Firms are increasingly relying on hiring from third countries, particularly for low-skill jobs, which should alleviate wage pressures and support employment, with unemployment expected to have fallen below 4% in 2025.

Inflation pressures are easing but remain elevated relative to pre-pandemic averages. Headline inflation is expected to have averaged around 4.0% in 2025, driven by indirect tax increases and regulated price adjustments, before falling to around 3.0% in 2026 as one-off fiscal and administered shocks fade. Inflation is projected to slow further to around 2.6% in 2027, supported by more moderate wage growth, easing domestic demand and stabilizing energy costs.

Bulgaria's business environment is adequate though spots of weaknesses remain. The World Bank Institute’s annual “Worldwide Governance Indicators” surveys suggest that the regulatory framework is generally business-friendly while weaknesses remain with regard to perceived corruption and the legal framework. The Heritage Foundation’s “Index of Economic Freedom” survey 2024 assigns Bulgaria rank 31 out of more than 180 economies, reflecting strong scores with regard to property rights, tax burden, business freedom and trade freedom. Weaknesses remain in the areas of judicial effectiveness and government integrity. On our proprietary “Environmental Sustainability Index”, Bulgaria is ranked 94th out of 210 economies, reflecting above-average scores for energy use and CO2 emissions per GDP and water stress, as well as its exposure to climate events and its readiness to protect itself against such events. However, there are still weaknesses regarding renewable electricity output and the recycling rate.