The Bulgarian National Bank forecasts a slowdown in economic growth and an acceleration in inflation next year. This is shown by the central bank's new macroeconomic forecast, published at the end of June.
According to the baseline scenario, Bulgaria's gross domestic product will grow by 2.8% in 2026, after the economy has been moving at a higher pace in recent years. In 2027, growth is expected to slow further to 2.7%, and in 2028, to accelerate slightly again to 2.9%.
The BNB points out that the main support for economic growth will continue to come from household consumption. However, Bulgarians' spending is expected to grow more slowly in the second half of 2026 and in 2027.
The reason is that higher prices will reduce the real purchasing power of households and limit some of their consumption. The Central Bank expects average annual inflation to reach 5% in 2026, with price growth likely to accelerate to 5.9% by the end of the year.
The main factor behind this is the rising cost of energy resources and their impact on the prices of a number of goods and services.
According to the forecast, inflationary pressure will gradually weaken in the coming years. Average annual inflation is expected to be 3.5% in 2027, and 2.9% in 2028. At the end of both periods, the inflation rate should approach 2.5%, which is significantly closer to the price stability that European institutions are striving for.
The agreement between the US and Iran may improve the forecast
In its analysis, the BNB notes that there are prerequisites for economic results to turn out to be better than those set out in the baseline scenario.
The agreement reached in June between the US and Iran to end hostilities is cited as a key factor. After the news, international oil prices have dropped significantly compared to the levels used in preparing the forecast.
If the trend continues, this could lead to lower inflation and higher economic activity in both 2026 and 2027.
In the published report, experts have also developed three alternative scenarios for the development of the Bulgarian economy. They are related to different options for the development of the situation in the Middle East and the possible impact on energy prices.
The longer and stronger a possible energy shock, the greater the pressure on inflation and economic growth, the central bank warns.
Compared to the March forecast, the BNB now expects slightly weaker economic growth in 2026 and 2027, but better performance in 2028. At the same time, the inflation estimate for the next two years has been increased, which means that the central bank expects more serious price pressure than previously forecast.