OECD cuts Bulgaria’s 2024, 2025 GDP growth projections

Sofia: Bulgaria’s economy is projected to grow by 2.3% in 2024 and 2.8% next year, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday, slightly lowering its forecasts from May. For 2026, the OECD sees Bulgaria’s economic growth at 2.6%.

The country’s gross domestic product (GDP) rose by 2.2% over the year to the third quarter of 2024 as household consumption was fueled by higher wages, credit growth and government transfers, the OECD said in its December 2024 Economic Outlook report. Real growth is projected to gain momentum as inflation abates, reflecting the lessening impact of the energy shock.

In its May 2024 Economic Outlook, the OECD forecast GDP growth of 2.5% for Bulgaria this year and 2.9% in 2025. The country’s economic output expanded by 1.9% in 2023.

Unlocking EU funds is expected to stimulate public and private investment, which were held back in 2024, though slow project implementation and stalled reforms required for the second Recovery and Resilience Facility payment could reduce the level of investment, the OECD said.

The organisation projects unemployment at 4.2% this year, which is seen to fall to 4.1% in 2025 and further to 4% in 2026.

“Low unemployment and robust real income growth will continue to support household consumption. Export growth should recover in line with external markets,” the OECD said.

Inflation is forecast to average 2.4% in 2024, accelerate to 2.7% next year and then decelerate to 2.5% in 2026. The rise in consumer prices should remain around current levels, but wage pressures will remain elevated due to persistent labour shortages and another minimum wage hike in 2025, the organisation noted.

Bulgaria is expected to adopt the euro in 2026, with technical preparations already underway. However, prolonged political instability could threaten planned reforms and investments, as per the report.

The OECD recommends that Bulgaria adopt a modest fiscal consolidation to ease demand pressures and ensure prudent public finances. To unlock EU funds and boost investment, the country should prioritise Recovery and Resilience Facility projects and reforms, while activation policies, such as improved support for those returning to Bulgaria, overhauling the social welfare system and enhancing skills investments would help expand labour supply.