Data shows a moderate improvement in the external environment over the forecast period, while significant geopolitical risks remain.
Real GDP growth in 2023 came in at 1.8%, matching expectations from the 2023 Spring and Autumn Forecasts.
In 2024, the growth of Bulgaria's gross domestic product is expected to accelerate to 3.2%, supported by domestic demand, after which the forecast is for a slight slowdown in economic activity in the period 2025–2027. During the forecast period, the growth rates of employment and labor wages will be delayed.
Activation of private investments is expected in sync with stronger external demand.
The average annual inflation for 2024 is forecast at 2.4%, and the inflationary processes in the country will continue to subside mainly in line with the expected dynamics of international prices.
In 2023, the Bulgarian economy registered an annual employment growth of 1%, which was mainly influenced by the increase in the number of people employed in services and construction. In 2024, the forecast is that economic growth will accelerate and in the following years will vary slightly below 3%.
The unemployment rate is expected to decrease from 4.3% in 2023 to 4.0% in 2027. The opportunities for transition from unemployment to employment are increasingly limited and our main assumption is that in the coming years the increase in employment will occur predominantly by drawing some of the inactive back into the labor force or by drawing labor from other countries.
Risks to the forecast due to geopolitical factors remain significant. Ongoing military conflicts are bound to have negative effects on the global economy, with a potentially stronger impact on the EU and Bulgaria due to geographical proximity. There is still a risk of supply constraints for certain raw materials, which could lead to a rise in international prices and/or further disruption of global supply chains. This would lead to the maintenance of higher inflation rates, to the retention of restrictive monetary policy longer than expected, which would negatively affect both foreign trade and domestic demand. A deterioration in financing conditions may have a stronger negative effect on investment and consumption than expected.
FULL SPRING MACROECONOMIC FORECAST OF THE INSTITUTE FOR ANALYSIS AND FORECASTS, HERE