EC Projects Slowdown in Bulgarian Economy Growth

The European Commission forecasts a slowdown of economic growth in Bulgaria to 2.7 percent in 2026 and 2.1 percent in 2027. In 2025, growth was 3.4 percent. However, consumption and investment are expected to decline in the second half of 2025 due to a lower contribution from the public sector in response to lower than planned government revenues. In 2026 and 2027, private consumption growth is expected to slow in line with the slowdown in wage growth and social transfers.

Wage growth is expected to slow as inflationary pressures subside and the private sector focuses on maintaining competitiveness, while public sector wage growth is constrained by fiscal constraints.

The EC forecasts the unemployment rate to fall below 4% in 2025. The employment growth reflects businesses’ efforts to attract workers, especially low-skilled ones, from third countries, which could help ease wage pressures in the coming years.

Inflation is expected to reach 3.5% in 2025, following increases in VAT rates on bread and restaurant meals, higher excise duties on tobacco and increases in administered prices for gas, heating and electricity. In addition, food prices rose for most of the year due to higher import prices.

In 2026, inflation is projected to ease to 2.9%, as the effects of the administered price increases fade. However, inflation in services and food is expected to remain high, while energy prices remain stable, in line with commodity prices. Higher food inflation is due to both higher import prices and rising wages for domestic producers. Inflation is projected to be 3.7% in 2027.

In 2025, the general government deficit is projected to remain at 3% of GDP, due to higher social spending and public sector wages, especially in sectors such as defence and internal security. As a result, expenditure growth continues to outpace revenue growth, despite efforts to improve tax collection, the restoration of standard VAT rates for bread and restaurant services, and the positive impact of private sector wage growth. The deficit is forecast to widen to 4.3% in 2027.