Bulgaria: 2025 Article IV Consultation-Press Release; Staff Report; and Staff Supplement

The 2025 Article IV Consultation highlights that Bulgaria is approaching a major milestone with the adoption of the euro in January 2026. Euro area accession provides a near-term boost to the outlook and offers an opportunity to reinforce institutions, bolster policy credibility, and raise medium-term growth. Gross domestic product (GDP) growth is projected to be strong at around 3 percent in 2025 and 2026, driven by sustained domestic demand, underpinned by robust wage growth, credit expansion, and fiscal easing. At the same time, external demand for Bulgaria’s exports is expected to stay subdued, reflecting slower growth in key EU markets and global uncertainty. Inflation is elevated and projected to decline only gradually. Tighter fiscal policy is recommended; a neutral fiscal stance would require an adjustment of about 1 percent of GDP. Moderating public wage growth and benefit indexation would generate fiscal savings and ease inflationary pressures. Addressing productivity and demographic challenges to boost medium-term growth will require persistent governance reforms, sustained investment in human capital, and increased labor market participation. Scaling-up quality public investment and reducing structural policy gaps could deliver substantial growth dividends.