OECD sees Bulgaria’s economic growth at 3% in 2025

Bulgaria’s economic growth will remain strong, at 3.0 per cent in 2025, before moderating to 2.6 per cent in 2026 and 2.4 per cent in 2027, the Organisation for Economic Co-operation and Development (OECD) said in its Economic Outlook, published on December 2.

Household and government consumption will continue to drive growth, the OECD said.

Investment will be supported by remaining EU fund disbursement and improved confidence linked to euro adoption in 2026, it said.

Export growth will track demand in key European markets.

Headline inflation has risen due to wage pressures, restored VAT rates and higher utility prices but will moderate as wage growth slows.

Persistent wage increases, however, could delay disinflation, the OECD said.

Strong increases in pensions, public sector salaries, social transfers and investment spending, but weaker-than-planned revenues may require spending adjustments to maintain the budget deficit within EU limits, the report said.

A moderate fiscal consolidation and more emphasis on growth-enhancing spending would help reduce inflationary pressures and support economic growth.

Structural reforms to streamline renewable energy development and grid access permit procedures, business registration, licencing and utility connections would accelerate the green transition and improve the business climate.

Annual GDP growth reached to 3.2 per cent in the third quarter of 2025 according to the flash estimate. Private and government consumption remain the key drivers, supported by rising real incomes, including public sector wages, particularly in security and defence, credit and social transfers growth.

Consumer confidence remains high, and retail sales continue to grow albeit at a slower pace, the report said.

Investment growth has strengthened, with the implementation of EU projects gaining pace after the formation of a new government.

The unemployment rate has fallen to 3.4 per cent, reflecting continued job creation amid strong economic growth.

Annual headline CPI inflation reached to 5.3 per cent in October, reflecting wage-driven cost pressures and strong demand, underpinned by a tight labour market and indexation of minimum wages and pensions, restored VAT rates, and higher utility prices.

With labour costs rising faster than productivity, the pass-through from wages to prices has strengthened, the OECD said.

Anual industrial production growth has continued to contract in 2025, though it showed a slight improvement in September. Confidence remains subdued, and an increasing number of firms report insufficient foreign demand.

Export growth has been held back by weak demand in key markets, particularly Germany. Import growth has turned negative despite strong consumption and investment growth, with a rundown of inventories accumulated since mid-2024.

Recent global trade policy changes, including higher US import tariffs on EU goods, will have a modest indirect impact, mainly through weaker EU demand, given Bulgaria’s limited direct trade linkages with the United States.

Lower-than-planned VAT revenue collection may leave limited fiscal room to implement all spending plans as intended, the OECD said.

“Given spending commitments on civil servant salaries, pensions and social benefits, capital expenditure may be reduced to maintain the budget deficit within the EU’s three per cent GDP ceiling,” the report said.