site.btaUPDATED Bulgarian Economy Showed Resilience amidst Multiple Shocks, Growth Is Expected to Recover and Inflation to Decline Further

The Bulgarian economy showed resilience amidst a succession of shocks, and the outlook is that of rebounding growth and further declining inflation, says the Concluding Statement of IMF staff at the end of an official staff visit to Bulgaria. The document was put out Tuesday and made public at a news conference by mission leader Jean-Francois Dauphin.

The mission took place March 6 to 19, during which time the IMF staff held a number of meetings with representatives of the Bulgarian authorities, businesses and the non-government sector.

The Concluding Statement says that inflation remains higher than in peers, and significant risks could push growth down and inflation up again. "In this context, fiscal policy needs to strike a balance between supporting disinflation and not harming the recovery. This calls for a neutral fiscal stance rather than the expansionary 2024 budget," the document reads.

"Looking ahead, and with the euro adoption in sight, policies need to tackle longstanding, intertwined challenges: poverty and inequality are significant and convergence toward EU average income is lagging peers while low investment and productivity and a shrinking population constrain economic growth. Fiscal reforms should aim at sustainably expanding space to address investment and social needs while structural reforms need to strengthen governance, boost productivity and competitiveness, and accelerate the green transition," says the Statement.

Taking a reporter’s question during the news conference, Dauphin said that Bulgaria's joining the euro area in 2025 is realistic.

He said that this country is ready as far as the legislative and technical requirements are concerned, adding that meeting the inflation criterion is a matter of time. Dauphin noted that there are many benefits of entering the euro area: not only reduced transaction costs but also greater confidence in the country, which implies more investment and a stronger institutional framework for the banking and financial sector.

Dauphin said that by adopting the currency board, Bulgaria has largely given up control of its monetary policy, as it mainly applies the policy of the currency it is tied to, namely that of the European Central Bank. He added that by joining the euro area, Bulgaria will have a seat at the table and will be part of the monetary policy decisions that concern its economy.