site.btaUPDATED EBRD Slightly Raises Bulgaria's 2024 Economic Growth Estimate and Lowers 2025 Forecast

The European Bank for Reconstruction and Development (EBRD) has revised down its economic forecast for the region in which it operates, lowering it by 0.3% for 2025 from its September 2024 estimate. Growth in the economies covered by the analysis is now expected to average 3.2% in 2025 before rising to 3.4% in 2026, according to the financial institution's updated forecasts published on its website.

The downward revision is mainly due to weaker external demand in Central Europe, the Baltic States and the south-eastern EU countries. 

In the EU countries of south-eastern Europe, economic growth slows down to 1.5% in 2024 (compared to 1.9% in the September 2024 forecast). The EBRD expects the region's economy to expand by 2.1% in 2025 (vs. 2.7% in the September forecast) and by 2.4 % in 2026.

According to the report, in a scenario in which the US raises tariffs on all imports by an additional 10 percentage points, GDP in the EBRD regions could be on average 0.1-0.2% lower in the short term.

While Jordan, the Slovak Republic, Hungary and Lithuania are some of the EBRD economies that are most vulnerable to such measures owing to their overall trade exposure to the US market, the report shows that Bulgaria, Slovenia and Romania are the most exposed to recently announced increases in US tariffs on steel and aluminium.

Inflation in Bulgaria stabilized at 2% by the fourth quarter but could pick up slightly in 2025. Fiscal risks related to the eurozone accession increased as the government is expected to propose a budget envisaging a deficit of 3 per cent of GDP and a significant increase in expenditures that needs to be met by better revenue collection in the absence of other measures.

Although the country's new regular government is already in place, the implementation of the EU's Recovery and Resilience Facility (RRF) remains heavily delayed, the report says.

Compared to the September 2024 forecast, Bulgaria's economic growth estimates were increased by 0.1 percentage points in 2024 and the outlook for 2025 was lowered by 0.5 percentage points. 

The economy is forecast to grow by 2.4% in 2025, amid uncertain outlook for investment and foreign demand. GDP growth is expected to inch up to 2.8% in 2026 on improving EU funds absorption and further regional integration.