Economic Development and Policies in Bulgaria 2025: Evaluations and Prospects. Focus: Fundamental Factors of Price Formation in the Bulgarian Economy

The Annual Report of the Economic Research Institute at the Bulgarian Academy of Sciences (ERI-BAS), Economic Development and Policies in Bulgaria 2026: Assessments and Expectations, offers a comprehensive reading of the Bulgarian economy in the context of the accession to the euro area. The report highlights the sustained but incomplete income convergence with the EU, the domestic nature of inflationary pressures, labour market constraints, and the lag in labour productivity as key obstacles to achieving sustainable economic growth. Special attention is devoted to fiscal and external sustainability, the risks of financing current expenditures through government debt, the need to pursue a restrictive fiscal policy, the stability of the banking sector, and the systemic tensions related to credit growth and the housing market. The report defends the thesis that euro area membership and the successful exit from the currency board arrangements are important institutional achievements, but they cannot by themselves accelerate economic development without investment, technological modernisation, and higher productivity. An original contribution is the development of a Production Factor Price Index, which traces the relationship between factor costs, producer prices, and consumer prices.