The growth rate of wages and consumption in Bulgaria will slow down

Salaries in Bulgaria will grow twice as fast as inflation in the new year 2024. This is the forecast of the global trade credit insurance company Allianz Trade (formerly Euler Hermes).

Its analysts expect average wage growth in Bulgaria to reach 9% this year - a significant slowdown from the reported 13.5% in 2023. Average annual inflation will settle at 4% - significantly below the reported 2023 inflation rate of 9.5%.

Experts expect a significant slowdown in consumption in Bulgaria - the forecast is that it will continue to grow, but by only 2% in 2024 compared to 5.5% and 3.7% in 2023 and 2022, respectively. During these years consumption was also a key factor for the growth of the Bulgarian economy.

The reasons for this year's cooling off are both the modest increase in wages and the expectations for interest rate growth and less favourable financing conditions.

The main factor for Bulgarian economic growth in 2024 is expected to be public spending. The forecast assigns it a growth of 4% compared to the past year. Experts also believe that investment activity will recover in the next two years thanks to the projects under the Plan for the Recovery and Sustainability of Bulgaria. Allianz Trade predicts investment growth of 4.2% for 2024.

Allianz Trade analysts expect Bulgarian exports to recover slowly and gradually in parallel with the movement of export markets. The forecast for 2024 is for a growth of 4.2%. However, imports will recover more convincingly and thus the net trade balance will be negative. Still, for comparison, a month before the end of 2023, Bulgarian national statistics reported about a 7% drop in exports.

Based on these dynamics, Allianz Trade's forecast is for moderate growth of the Bulgarian economy with around 2% GDP growth for 2024 and 2.5% for 2025. The forecast for this year is one of the more conservative in recent months, approaching this of the European Commission while significantly differing from that of the Bulgarian Ministry of Finance for a growth of 3.2%.

Forecasts for the Bulgarian economy for 2024

 

The chief analyst of Allianz Trade, Manfred Stamer, predicts that price stability in Bulgaria will not be fully restored in 2025, but, nevertheless, Bulgaria's accession to the eurozone at the start of next year remains possible.

The Bulgarian business environment is rated as

adequate with some unaddressed weaknesses.

The experts once again point to the unresolved problems with corruption and the effectiveness of the judicial system, government instability and public dissatisfaction with the standard of living as the main challenges facing the Bulgarian economy. They also pay attention to its vulnerability to external economic shocks due to the high export dependence.

Translated by Tzvetozar Vincent Iolov