The lender also expects Bulgaria’s accession to the Eurozone to be postponed to 2026, requiring a stable government that is actively working towards its strategic foreign priorities, Unicredit said in the latest edition of its CEE Quarterly report published at the end of last month.
In 2025, Bulgaria's gross domestic product (GDP) is seen to expand by a real 3.2%, slightly lower than the 3.3% growth projected in January.
Average consumer price inflation in 2024 is now estimated at 3.1%, against 4.3% projected in the previous forecast, and then seen to slow down further to 2.9% next year, driven by declining global food and energy prices. Additionally, wage growth in the service sectors has entered a downward trajectory, contributing to lower core inflation.
The political uncertainty in the country could prompt investors to take a cautious approach, negatively impacting private capital expenditures (capex), while the transition to a new government is expected to slow decision-making within public administration, affecting public capex, including that related to EU funds, the lender said.
"More specifically, we think Bulgaria is set to receive only one tranche from its Recovery and Resilience Plan this year, while the absorption of money from the multiannual financial framework will likewise slow temporarily. This is because attention is expected to shift to the snap parliamentary election and related campaigning, leaving less time for other priorities, including the implementation of measures needed to unlock EU funding," UniCredit noted.
To address its funding needs, the Bulgarian government is forecast to issue domestic bonds worth 500 million levs ($277.8 million/255.6 million euro) in 2024, alongside external bonds worth 4.75 billion euro ($5.16 billion). The placement of Eurobonds is seen to happen at the end of the year, following the expected formation of a new pro-European and reforms-oriented government after the June snap elections.
