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Bulgaria
GDP growth is projected to slow to 1.7% in 2023 before recovering to 2.8% in 2024 and 3.0% in 2025. Low
interest rates fuelled a household credit boom, boosting private consumption, but this is easing. The catch-up
in the disbursement of EU funds is expected to contribute positively to investment in 2024 and beyond.
Inflation is high in 2023 but is expected to moderate during 2024. The large, planned minimum wage
increases in 2024 create risks of more persistent inflation, while changes in global energy prices could impact
exports and inflation.
Interest rates are expected to continue to broadly follow euro area monetary policy given the fixed exchange
rate regime of the Bulgarian lev to the euro. The fiscal deficit is likely to widen if spending increases are not
fully offset by higher tax collection. Fiscal consolidation would help to manage demand in the economy and
prepare for longer-run challenges. Structural reforms are needed given the shrinking labour force and the
need to encourage young people to stay in Bulgaria. While some climate policies and targets are in place,
the development of a comprehensive green transition roadmap is a priority.

Domestic demand has been strong

GDP expanded by 1.7% in the year to the third quarter of 2023, with negative real interest rates and robust
labour markets supporting strong private consumption and investment. However, government
consumption was weak due to the lack of an agreed budget during the first half of the year. The annual
inflation rate has fallen rapidly from a peak of 18.7% in September 2022 to 5.8% in October 2023. Core
inflation has been more persistent, fuelled by second-round effects from high food and energy prices and
rising labour costs. Unemployment is low but rising, although the labour market is set to remain tight given
demographic headwinds.

Bulgaria

1. Nominal average gross monthly wages for all sectors of employees under a labour contract in lev.
2. The shortage of labour measure refers to the share of firm respondents to a business survey conducted by the National Statistics Institute
that identified shortage of labour as a factor limiting the activity of their enterprise. It is the arithmetic mean of the same survey conducted in four
sectors: industry, construction, retail trade and services.
Source: National Statistics Institute.
StatLink https://stat.link/8vh6rt

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023
20 

Bulgaria: Demand, output and prices

2020 2021 2022 2023 2024 2025

Current prices Percentage changes, volume

BGN billion (2015 prices)
Bulgaria

GDP at market prices 120.5 7.7 3.9 1.7 2.8 3.0

Private consumption 70.3 8.5 3.8 6.6 4.3 3.4
Government consumption 11.7 4.3 4.4 -0.2 5.9 3.1
Gross fixed capital formation 23.0 -8.3 6.5 0.0 7.8 4.4
Final domestic demand 105.0 4.1 4.5 4.5 5.1 3.6
Stockbuilding¹ 13.2 4.8 2.4 -7.0 -1.0 0.0
Total domestic demand 118.2 8.2 6.3 -3.5 3.5 3.3
Exports of goods and services 67.6 11.2 11.6 -3.5 0.3 3.9
Imports of goods and services 65.3 10.7 15.0 -7.1 1.8 4.5
Net exports¹ 2.3 0.4 -1.8 2.5 -0.9 -0.3
Memorandum items
GDP deflator _ 7.1 16.2 8.6 4.2 2.9
Consumer price index _ 3.3 15.3 9.5 4.5 3.1
Core consumer price index² _ 1.4 7.6 9.0 4.6 3.1
Unemployment rate (% of labour force) _ 5.3 4.3 4.4 4.9 4.8
Household saving ratio, net (% of disposable income) _ 5.6 3.0 -0.4 1.2 2.4
General government financial balance (% of GDP) _ -4.0 -2.9 -3.2 -3.3 -3.6
General government gross debt (% of GDP) _ 35.1 32.2 34.2 36.7 39.7
General government debt, Maastricht definition³ (% of GDP) _ 23.9 22.6 24.5 27.1 30.0
Current account balance (% of GDP) _ -1.7 -1.4 0.6 -0.5 -1.1
1. Contributions to changes in real GDP, actual amount in the first column.
2. Consumer price index excluding food and energy.
3. The Maastricht definition of general government debt includes only loans, debt securities, and currency and deposits, with debt at
face value rather than market value.
Source: OECD Economic Outlook 114 database.
StatLink 2 https://stat.link/bixja9

Weakness in euro area demand will hold back manufacturing exports and tourism in the near term, but
this will gradually recover as growth in Europe picks up. With Bulgaria a net electricity exporter, trade
prospects depend heavily on developments in European energy markets this winter. A gradual rise in
energy prices in the near term could also stoke renewed domestic energy-related inflationary pressures.

Near-term fiscal policy will be broadly neutral

Interest rate developments will broadly follow monetary policy tightening in the euro area, consistent with
the fixed exchange rate to the euro as part of the currency board arrangement and planned euro adoption.
Fiscal support to cushion the effects of the energy price shock, such as reduced VAT rates for energy and
food products, will be largely phased out by end-2023. The government foresees significantly higher
additional spending from increases in public sector salaries and pension payments and plans higher
revenues from newly outlined reforms to combat tax evasion and the non-payment of taxes. Overall, the
budget deficit will widen if these revenue-raising measures do not fully offset the planned higher spending.
The government debt ratio remains low and debt dynamics are supported by low interest rates on
government debt. However, there are significant fiscal pressures from a declining labour force and rising
pension costs. Meanwhile, long-term ageing-related spending pressures are set to rise given demographic
trends, with health care and pension expenditures as a share of GDP expected to increase by 1 percentage
point of GDP between 2024 and 2040.

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023
  21

GDP growth will slow in the near term before recovering

Growth has been very rapid but is set to slow to 1.7% in 2023 owing to the weaker-than-expected external
environment, but then rebound to 2.8% in 2024 and 3.0% in 2025. The disbursement of EU funds is
predicted to spur an increase in private sector investment. Export growth will remain weak in the near term
but should gradually recover throughout 2024 in line with developments in the euro area. Inflation is set to
slow gradually to 4.5% in 2024, reflecting declining energy prices, but will be kept up by relatively rapid
nominal wage growth. With persistent labour shortages, upward pressures on demand and wages could
undermine efforts to bring inflation back to target.

Fiscal consolidation is needed, while reforms are needed to boost employment

Monetary policy should remain consistent with the existing currency board arrangement to ensure stability
and in anticipation of future euro adoption. Deficit-neutral approaches to financing new government
spending in the 2023 budget are helpful, but fiscal consolidation is needed to reduce the deficit, damp
domestic demand and offset longer-run spending pressures relating to ageing and demographic
challenges. Activation policies and reforms are necessary to tackle inactivity and to raise productivity.
While a range of climate policies are in place, an overarching governmental strategy to motivate green
transition policies, building on the Strategic Vision for the Sustainable Development of the Electricity
Sector, should be developed.

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023