EC affirms Bulgaria's 2024 GDP growth f'cast at 1.9%

Last year, Bulgaria's gross domestic product (GDP) growth slowed to 1.8%, chiefly due to reduced exports and inventory accumulation, the Commission said in its Spring 2024 Economic Forecast.

The country's economy is projected to grow by a real 2.9% in 2025, marking an increase of 0.4 percentage points from the Commission's previous macroeconomic forecast. Exports are seen to expand significantly after the first quarter of 2024 in line with recovering external demand, with imports rebounding due to domestic demand.

"Consumption growth is assumed to recover in the remainder of 2024 and in 2025, supported by the expected still favourable labour market situation, while private saving rates continue to increase. Investment is expected to continue to expand over the forecast horizon, supporting production capacity," the EU executive said.

Bulgaria's annual Harmonised Index of Consumer Prices (HICP) averaged 8.6% in 2023 and is seen to ease to 3.1% in 2024 and 2.6% in 2025, compared to 3.4% and 2.9% projected by the Commission in February. The lower inflation outlook is backed by the projected aggregate wage moderation and contained import price increases.

In terms of unemployment, the labour market remains tight as employment gains in private and public services offset losses in the manufacturing sector. The unemployment rate is forecast at 4.3% in 2024, followed by a decline to 4% in 2025.

The country's general government deficit, equivalent to 1.9% of GDP last year, is projected to widen to 2.8% in 2024 and further to 2.9% next year, driven by increased spending on pensions and wages.

Public investment is set to shrink in 2024 after a peak in 2023 from the conclusion of projects funded by the European Structural and Investment Funds (ESIF) 2014-2020. At the same time, it will be positively impacted by the delayed implementation of the Recovery and Resilience Plan (RRP) and the accrual of military spending recorded upon delivery.

Gross public debt to GDP ratio was 23.1% in 2023 and is expected to increase to 24.8% this year and then decline to 24.6% in 2024. However, Bulgaria's fiscal outlook faces risks, given that the permanent increases in wages and pensions are not fully compensated by structural measures that go beyond 2025, the EC noted.