Economic Overview
The Covid-19 pandemic hit Bulgaria at a time when its economy was performing well. Before the sanitary crisis, a series of structural reforms, the highly successful integration of Bulgarian manufacturing firms into world production chains, and sound macroeconomic management had led to five years of growth rates above 3%, rapidly rising real wages, and historically low unemployment. However, the country recovered well and in 2023 GDP grew an estimated 2%, according to the latest figures from the EU Commission. Despite encountering diminished external demand, increased interest rates within the euro area, and sustained price pressures, private consumption notably expanded, particularly in the initial half of the year. This growth was bolstered by a robust labor market, enhanced consumer confidence, reduced inflation, and vigorous lending activity. Real GDP is expected to grow by 1.9% in 2024 and by 2.5% in 2025, with domestic demand as the main growth driver (EU Commission; 3.2% and 3.%, respectively, according to the IMF).
The country's public finances are relatively strong, with a low debt-to-GDP ratio compared with EU countries, estimated at 21% in 2023. Nevertheless, the IMF expects the ratio to grow over the forecast horizon, to 22.9% this year and 25.2% in 2025. The majority of government debt in Bulgaria is fixed-rate and has a long average maturity, which mitigates Bulgaria's vulnerability to monetary tightening overseas. On average, general government interest payments are expected to amount to 1.6% of revenues from 2023 to 2025 (Fitch Ratings). The IMF projected a 2.7% GDP budget deficit in 2023, influenced by lower energy support costs, increased social and capital spending, and higher public sector wages. Despite Bulgaria's history of fiscal responsibility, the current government may lean towards slightly wider deficits in the medium term to enhance public sector investments and address social inequalities. Anticipated deficits are 3.1% of GDP in 2024 and 3.5% of GDP in 2025. Inflation fell from 14.3% at the close of 2022 to an average of 8.5% in 2023, with all sectors contributing to this decline, particularly food prices. The slowdown in service inflation was mainly due to transport and catering services, which are closely tied to energy and food costs. Decreases in food and energy prices helped stabilize inflation expectations and prevented a significant wage-price cycle. Annual inflation is projected to significantly slow to 3% in 2024 (IMF).
During 2023, businesses managed to maintain high levels of employment and achieve moderate increases in nominal wages. Albeit increasing slightly, the unemployment rate remained relatively low at 4.6%, and is expected to gradually decline to 4.2% by 2025. Bulgaria is classified as an upper-middle-income country, with a GDP per capita (PPP) estimated at USD 33,582 in 2023 by the World Bank, compared to an EU average of USD 54,249. Nevertheless, income inequality in Bulgaria is among the highest in the EU, and almost 32.2% of the population is at risk of poverty (the second-highest rate in the EU after Romania).
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
| GDP (billions USD) | 89.12 | 103.10 | 110.34 | 117.50 | 123.82 |
| GDP (Constant Prices, Annual % Change) | 3.4 | 1.7 | 3.2 | 3.0 | 2.9 |
| GDP per Capita (USD) | 13,821 | 16,087 | 17,320 | 18,555 | 19,671 |
| General Government Balance (in % of GDP) | -1.1 | -2.7 | -3.1 | -3.5 | -2.8 |
| General Government Gross Debt (in % of GDP) | 21.8 | 21.0 | 22.9 | 25.2 | 26.8 |
| Inflation Rate (%) | n/a | 8.5 | 3.0 | 2.1 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 4.2 | 4.6 | 4.4 | 4.2 | 4.2 |
| Current Account (billions USD) | -0.61 | 0.00 | 0.08 | -2.15 | -0.67 |
| Current Account (in % of GDP) | -0.7 | 0.0 | 0.1 | -1.8 | -0.5 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
See the country risk analysis provided by La Coface.
