EC forecasts 7.8% inflation in Bulgaria in 2023

The European Commission forecasts inflation in Bulgaria to be 7.8% in 2023. Because of high energy prices, inflation in 2022 was 13%. It is expected to fall further to 4% in 2024 as food price dynamics will weaken.

The Commission presented its winter economic forecast today. The Bulgarian economy is expected to grow by 1.4% this year and by 2.5% in 2024.

"Despite high inflation, economic activity continued to expand in 2022, supported by robust export growth and by increases in wages and social transfers that offset rising consumer prices. However, private consumption growth slowed in the first half of the year as inflation gathered pace," the analysis for Bulgaria said.

According to Brussels, the downward trend in fixed capital investment that started in 2021 has continued in 2022. Rising prices of capital goods in both construction and equipment are likely to constrain the latest investments.

The economy is expected to depend largely on the interaction between wage and price developments. Short-term indicators and data suggest that inflation will decline, but gradually, as services price inflation continues. In a tight labour market, wages are expected to continue to grow strongly and support household consumption.

The EC forecasts that export growth will slow significantly in 2023. In 2024, exports are expected to grow in line with external demand. Increased absorption of European Union funds, in particular under the Recovery and Resilience Plan, is expected to support aggregate investment in both 2023 and 2024. Potential delays in the implementation of the Recovery Plan pose a risk to investment growth.

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