site.btaCentral Bank Expects Annual Inflation to Accelerate in First Half of 2025

Bulgaria's annual Harmonised Index of Consumer Prices inflation slowed down to 2.1% in December 2024, from 5% at the end of 2023, the Bulgarian National Bank (BNB) says in its quarterly Economic Review, published Friday.  According to the central bank, this deceleration reflects lower food inflation (mainly due to the base effect of the previous year) and the fall in the prices of industrial goods. At the same time, services followed by the groups of goods and services with administratively controlled prices and tobacco and of food products had the largest positive contribution to the overall inflation at the end of 2024. Inflation in these groups remained at a high level, reflecting largely the continuing growth of unit labour costs and strong consumer demand.

Annual inflation is expected to accelerate in the first half of 2025, the Economic Review reads further. The assumptions used in the forecast about the effects of increases in some administratively controlled prices, in combination with projected high growth rates of private consumption and of unit labour costs in the context of labour shortages, are expected to continue exerting pro-inflationary pressures on final consumer prices.

According to the central bank, the growth of Bulgaria's real GDP in the last quarter of 2024 will slightly accelerate from the previous quarter both at the chain and annual bases. The increase of real GDP in the first half of 2025 will be backed mostly by domestic demand, while the net export is expected to continue to have a negative contribution.

The latest Economic Review was presented to the BNB Governing Council at its meeting on February 20. The review is based on statistical data and information published by February 3, 2025. The expectations described in the document about Bulgaria's short-term economic development (until the second quarter of 2025) are based on the central bank's forecast made as at January 15, 2025.