Bulgaria’s economic outlook for 2025–2026 points to a period of moderated growth, as both external and domestic factors weigh on the country’s performance. According to the latest macroeconomic forecast, real GDP is expected to expand by 2% in 2025 and 2.1% in 2026, following stronger growth of 2.8% in 2024. The slowdown reflects weaker private consumption, subdued export prospects, and declining private investment, offset only partially by increased public spending supported by EU funds.
In 2024, growth was driven primarily by robust household consumption, supported by higher real wages, employment gains, and expanded social transfers. However, exports of goods and services contracted sharply, hit by the ongoing consequences of Russia’s war against Ukraine. Exports to both Russia and Ukraine fell by around one third compared to the previous year, while demand from major markets such as China and the United Kingdom also declined. Investment dropped by 1.1% due to reduced public spending, though firms increased their inventories in anticipation of future market recovery.
The year 2025 is projected to bring heightened price pressures from several directions. Restored higher VAT rates on bread and restaurant services, new excise duties on tobacco, and rising costs for electricity, gas, and other utilities are expected to drive inflation up to 3.6%, compared to 2.6% in 2024. These increases will likely dampen household spending, with private consumption growing more moderately as families turn toward precautionary savings in response to temporary inflationary spikes. Export growth, while revised downward, is expected to recover modestly over the year, supported by positive early-quarter performance. Maintenance works in steel and oil refining, however, will temporarily constrain goods exports.
On the investment front, private investment is projected to contract in both 2025 and 2026, reflecting heightened economic uncertainty and tighter financing conditions. Public investment, by contrast, is expected to accelerate, driven by improved absorption of EU recovery and cohesion funds. The government’s efforts to advance long-delayed infrastructure and defense projects should provide a partial counterbalance to the weakness in private capital formation.
The labour market remains resilient, with unemployment projected to decline slightly from 4.2% in 2024 to 4% in 2025 and 3.8% in 2026. Wage growth, however, is expected to moderate. After a surge in compensation in early 2024, nominal wage growth slowed significantly by the end of the year. This trend is set to continue in the private sector as companies seek to preserve competitiveness amid slowing demand. Public sector wages, by contrast, are forecast to rise strongly, particularly in defense and social services.
Inflation is expected to gradually decline after the early-2025 spike, reaching 1.8% in 2026. The disinflation process will be supported by easing energy prices, a stabilization in international food markets, and more moderate wage dynamics. Lower inflation should help restore purchasing power and stabilize expectations by the end of the forecast period.
On the fiscal front, Bulgaria’s general government deficit is projected to narrow from 3% of GDP in 2024 to 2.8% in both 2025 and 2026. The improvement reflects higher revenues from restored VAT rates, increased excise duties, and stronger dividend contributions from state-owned enterprises, as well as continued efforts to combat tax evasion. Nonetheless, rising public wages and social spending will keep fiscal pressures elevated. Public debt is forecast to climb gradually, from 24.1% of GDP in 2024 to 27.1% in 2026, due to sustained deficits and a weaker nominal GDP trajectory.
Despite the moderate headline growth, the risks to Bulgaria’s economic outlook remain tilted to the downside. Persistent inflation, slower recovery in external markets, and the fiscal impact of higher public-sector wages and pensions could weigh on growth and debt dynamics. Yet, if Bulgaria succeeds in accelerating EU funds absorption and maintaining fiscal discipline, the economy could regain a stronger footing toward the end of 2026.
Overall, Bulgaria’s short-term economic trajectory reflects a delicate balance between structural resilience and cyclical vulnerability. The coming two years are likely to test the country’s ability to manage inflation, sustain employment, and channel EU investments effectively — all while keeping public finances within the 3% deficit threshold that underpins long-term macroeconomic stability.
