April 11 (SeeNews) - Bulgaria's real economy is forecast to expand by 2.1% in 2024, in line with the expected recovery in the Eurozone, the World Bank said on Thursday, cutting its January projection by 0.3 percentage points.
The country's gross domestic product (GDP) is expected to grow by 3.1% in real terms in 2025, the global lender said in the spring 2024 edition of its Europe and Central Asia Economic Update, lowering its January prediction for 3.3% growth next year. Economic growth is then seen to decelerate to 2.7% in 2026.
Bulgaria's economy expanded by an estimated 1.8% last year, or slightly above the World Bank's January assessment of 1.7% growth in 2023, driven by strong household consumption and the reduced impact of negative net exports, which were offset by stagnating government expenditure and decreased gross capital formation.
Consumer price inflation is projected to slow to 5.9% in 2024 from 9.5% estimated for last year, before further subsiding to 4.2% and 2% in 2025 and 2026, respectively.
"Bulgaria’s target to join the eurozone in 2025 may be difficult but not impossible to reach, should there be a stable government and the disinflation trend continues in the coming months, as expected," the World Bank noted.
However, the ongoing credit expansion, along with a boom in construction, could lead to a construction credit bubble and a rise in non-performing loans despite the current stability and profitability of the banking sector.
Additionally, political instability has increased following the failed prime minister rotation between the two ruling coalition partners, resulting in the collapse of the country's regular government last month.
"The country is now heading towards a new round of early elections – the sixth in about three years – which threaten to slow reform momentum and jeopardise the achievement of key policy goals such as near-term Eurozone membership," the global lender warned.