Bulgaria Economic Outlook
Growth slowed year on year from Q2 in Q3—in line with our panel’s forecast—due to a sharper fall in exports amid weak external demand. However, activity still outpaced the EU average thanks to stronger growth in fixed investment and consumption. Sustained disinflation, stronger wage growth year on year and lower interest rates compared to the Euro area boosted domestic demand. In Q4, GDP growth is likely dipping slightly from Q3 year on year. Downbeat activity in the broader EU economy is likely dampening exports. However, economic sentiment improved in October on recovering confidence in the industrial and construction sectors. In other news, Bulgaria will end its exemption to EU sanctions on Russian oil imports ahead of schedule from 1 January. The move should have no impact on domestic energy prices but will reinforce Bulgaria’s pro-Ukraine stance in line with the EU.
In October, inflation dipped to 5.8% (September: 6.3%) on softer growth in food prices. Our panel sees price pressures more than halving in 2024 from 2023’s projection on average as monetary policy tightening transmits through the economy and commodity prices cool year on year. Potential disruptions to energy supply and a tight labor market pose upside risks.