As a result of Bulgaria's decision to adopt the euro, international rating agencies Fitch Ratings and S&P Global Ratings have raised the country's long-term foreign currency credit rating to 'BBB+' with a stable outlook - the highest level of investment grade in the mid-range category. Scope Ratings has also raised the rating to 'A' (from 'BBB+') in both local and foreign currency, with a stable outlook. “Improved credit ratings facilitate access to cheaper financing for the state and business“, explained the chief economist of a large Bulgarian bank, Dr. Emil Kalchev.
As for the labor market, it has remained stable since the beginning of this year. It was the same in June, with the harmonized unemployment rate reaching 3.7% (compared to June last year), according to Eurostat data. “Against the backdrop of a chronic labor shortage due to the demographic situation in the country, the labor market in Bulgaria reports one of the lowest unemployment rates among the European Union member states“, commented Kalchev.
“The sustainable trend will persist throughout the year and will continue after the adoption of the euro. An expected benefit for hired labor is the greater integration of the Bulgarian with the European labor market, i.e. even easier labor mobility within the Union and the euro area, due to the elimination of transaction costs. On the other hand, due to the elimination of the currency risk in relation to the euro, an increased flow of foreign direct investment is expected in Bulgaria, especially from euro area countries, which will lead to new jobs and improved pay (especially) for qualified labor. Therefore, we are revising our forecast for the harmonized unemployment rate downwards from 3.9% to 3.8% for this year and from 3.8% to 3.7% for 2026. “, Kalchev also noted.
In June, consumer inflation (according to the national methodology) accelerated to 4.4% (compared to June last year). The most positive contribution to it was made by the growth in prices of food and non-alcoholic beverages by 2.2 percentage points, followed by prices of housing, water, electricity and fuel by 0.9 percentage points, recreation and culture by 0.8 percentage points, restaurants and hotels by 0.6 percentage points and alcohol and tobacco by 0.3 percentage points. “In this context, taking into account the data on consumer and harmonized inflation in Bulgaria for June, we are increasing our forecast for the average annual harmonized inflation from 2.6% to 3.5% for 2025 and from 2.5% to 3.4% for 2026.“, added the chief economist of UBB.
The overall business climate indicator recorded a decline from 21.7% in June to 20.6% in July. By sector, expectations in industry fell from 18.4% to 17.4%. In retail trade, they also fell from 30.4% to 25.0%. In services, there was also a slight decrease, while in construction, expectations increased slightly from June to July.