site.btaCentral Bank Forecasts Higher Economic Growth in Bulgaria in 2025, Lower GDP Growth in 2026

The Bulgarian National Bank (BNB) revised upwards its growth expectations for the national economy in 2025, but it also lowered its forecast for GDP growth in 2026, which transpired from the Bank's regular quarterly Macroeconomic Forecast published on the BNB website Thursday.

In its March forecast, the BNB expects Bulgaria's real GDP growth to come in at 2.8% in 2025, then temporarily slow to 2.2% in 2026 and accelerate to 3.1% in 2027. By comparison, the bank's forecast released in January expected GDP to grow by 2.5% this year, 3% in 2026 and 2.5% in 2027.

The upward revision of the 2025 real GDP growth forecast by 0.3 percentage points compared to December 2024 is primarily driven by a projected increase in government consumption and a more positive contribution from inventories.

Economic activity growth is revised downward by 0.8 percentage points for 2026 and upward by 0.6 percentage points for 2027 relative to the December 2024 macroeconomic forecast. This is driven by revisions to fixed investment and partly offset by the change in the contribution of net exports, while final consumption growth remains unchanged. The downward revision of fixed investment for 2026 and the upward revision for 2027 are mainly driven by new information received from the updated medium-term budget projection for the 2025-2028 period on public investment related to the acquisition of military equipment.

Annual average inflation is projected to accelerate to 3.8% (0.5 percentage point upward revision from the transitory forecast) in 2025, with the main contributors to the increase expected to be the food and services groups. Annual average inflation is projected to slow to 2.4% in 2026, mainly due to a decline in inflation in the administered price and tobacco and food groups, while it is expected to reach 2.6% in 2027.

In terms of year-end inflation (as measured by the Harmonized Index of Consumer Prices), inflation is expected to reach 3.5% in 2025, 2.5% in 2026 and 2.6% in 2027. The BNB's expectations have been revised upwards for 2026 and 2027 compared to the transition forecast, by 0.4 pp and 0.2 pp, respectively.

The BNB's forecast for key macroeconomic indicators is prepared as of March 26, 2025, and is based on assumptions about the development of the international environment and the price dynamics of major commodity groups on international markets as of March 6, 2025. The forecast does not take into account the effects of the sharp intensification of the trade war after the comprehensive tariffs announced by the US on April 2.

The latest edition of the BNB's macroeconomic forecast examines the exposure of Bulgarian exports to the US in the context of the new trade tariffs imposed by US President Donald Trump. The sharp intensification of the global trade war following the comprehensive tariffs announced by the US creates significant uncertainty regarding world trade and, consequently, economic and price developments globally, in Europe and in Bulgaria, the analysis points out.

Estimates show that the exposure of Bulgarian exports to the US is relatively limited, and therefore, the direct effects on economic activity in Bulgaria through the trade channel are expected to be relatively weak. However, the intensification of the trade war raises significant uncertainties for the development of world trade and for the external demand for European goods, the BNB noted.