The military conflict in the Middle East creates serious uncertainty about international energy prices and accordingly increases inflation risks in the euro area and Bulgaria.
The strongest impact is expected in the short term, mainly through higher energy prices. This was announced by the Bulgarian National Bank, whose actions are focused in two directions - participation in determining the monetary policy of the Eurosystem and assessment of the potential effects on inflation in the country.
Within this process, the BNB participates in the meetings of the Governing Council of the European Central Bank. At the meeting on March 18-19, 2026, the main interest rates were left unchanged, and the commitment to stabilize inflation around 2% in the medium term was confirmed. Decisions will continue to be made on the basis of incoming economic data, without a pre-fixed interest rate trajectory.
According to estimates, the development of inflation in the medium term will depend on the duration and intensity of the conflict, as well as on the speed at which higher energy prices are passed on to final consumer prices and economic activity.
The BNB has prepared a baseline macroeconomic scenario, according to which inflation in Bulgaria will reach 3.7% in 2026, after which it will slow down to 3.2% in 2027 and 2028. This slowdown is explained by the effect of the high base in energy prices and the upcoming introduction of the European Emissions Trading Scheme (ETS2).
Due to the high uncertainty, two adverse scenarios have also been developed. In a moderately adverse scenario, inflation will be higher by 0.7 percentage points in 2026, by 1.4 points in 2027 and by 0.6 points in 2028. In a severely adverse scenario, the deviation will reach 1.2, 3.4 and 2.3 percentage points, respectively, reflecting stronger second-round effects on prices.
These scenarios are illustrative in nature and do not include possible fiscal and monetary policy measures. Their aim is to show the main mechanisms through which external price shocks can be transmitted to the Bulgarian economy.