UniCredit forecasts Bulgaria's GDP growth at 2.5% for 2024 and 3.1% for 2025

UniCredit Bulbank forecasts a 2.5% growth if Bulgaria's GDP in 2024, up by 1.8% year-on-year, and some 3.1% growth in 2025, according to the bank's latest macroeconomic analysis published on Monday. The outlook is supported by anticipated increases in private consumption, real wage, and household credit, which have overperformed in the second quarter of 2024.

Political instability is expected to hinder private sector investment and delay the execution of structural reforms essential for enhancing the uptake of funds under the National Recovery and Resilience Plan (NRRP), thereby boosting public sector investment. UniCredit's report predicts the utilization of only three tranches under the NRRP, in comparison to the four tranches anticipated in the earlier forecast in April.

Real wages recorded their most significant annual increase in 15 years during the first quarter of 2024, but UniCredit predicts a slowdown in wage growth in 2025 due to falling inflation rates. Inflation is anticipated to hit its lowest level at approximately 2.5% in November and December 2024 year-on-year, coinciding with the typical period for wage renegotiations.

The core Consumer Price Index (CPI) is expected to drop to 2.9% in 2024, a reduction of 0.2% in comparison to the bank's April forecast. The decline is primarily attributed to reduced food and energy prices in the second quarter of 2024.

UniCredit experts remain optimistic about the eurozone inflation criterion in the last quarter of 2024. They anticipate that Bulgaria will seek an extraordinary convergence report to facilitate euro adoption in 2025.