Simona Gotsova 
Public Finances
BNB: The crisis in the Middle East will determine inflation in Bulgaria
The central bank expects consumer prices to rise faster than economic growth this year and next
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~ 2 min read
Inflation in Bulgaria will accelerate this year driven by rising labor costs and strong private consumption.
However an external factor – the conflict in the Middle East, which has driven up energy and fuel prices – is expected to have a massive impact on its trajectory. The latest issue of the Bulgarian National Bank’s (BNB) “Economic Review” bulletin notes this.
According to the report annual inflation in Bulgaria will accelerate to 4% in 2026 and in 2027 it will slow down but mainly due to the high base of energy product prices from this year.
A key factor driving consumer price dynamics in 2026 is expected to be the rise in crude oil prices due to the war in the Middle East,” the BNB writes in its analysis.
It notes that inflation may slow down next year, but inflation for services “is expected to remain persistently high.” In 2028 price increases will remain at the 2027 level, with a slowdown in the core components of the inflation index while energy products will see an acceleration linked to the introduction of the Emissions Trading System (ETS).
We remind you that Bulgaria is part of a group of 13 EU countries calling for a review of the ETS.
Compared to the December forecast the BNB expects higher consumer price growth in 2026 while for 2027 expectations are for no change.
Regarding the growth of the Bulgarian economy the central bank notes that private consumption continues to make the largest positive contribution to real GDP growth, and fiscal policy also had an impact in the previous year — on the one hand through increased government consumption and investment and on the other through higher social transfers to households and strong growth in compensation costs for employees in the “General Government” sector.
According to the baseline scenario, real GDP growth in 2026 will slow to 3% compared to 2025, after which it will continue to gradually decline to 2.9% and 2.8% in 2027 and 2028, respectively,” the BNB notes.
Translated with DeepL.
