Bulgarian Ministry of Finance expects high growth of national economy

The Bulgarian Ministry of Finance has published its autumn economic forecast with relatively high optimistic economic growth for 2024. Finance Minister Assen Vassilev predicts 3.2% economic growth next year, matching the forecast of the International Monetary Fund published last month. However, this is the highest among other national and international institutions’ forecasts in the last two months.

According to the ministry’s report, on whose basis the 2024 draft budget is being developed, the growth of the economy will be driven by domestic demand, and for the period 2025-2026, an increase of about 3% is expected.

The forecast of the Ministry of Finance also includes the average annual inflation rate this year reaching 9.1%, which is well above the parameters for Bulgaria's entry into the Eurozone. Last month, the World Bank predicted a slightly higher average annual inflation in Bulgaria for 2023 – at 9.8% - and it stressed that this could trip Bulgaria up in the run to its planned currency shift.

Still, the Bulgarian Ministry of Finance expects that next year inflation will decrease to 4.8%, and the annual inflation at the end of 2024 will reach 3.3%. The reason for the slowdown is expected to be the projected decrease in the price of transport fuels and energy commodities. The prices of services and food are also expected to shrink significantly but will continue to be the main inflation engine.

The Ministry also predicts that inflation in 2025 and 2026 will continue to slow down and at the end of these years will reach 2.4 and 2.1%, respectively.

Minister Assen Vassilev's department also expects credit lending to households - mainly mortgage loans - to slow next year due to the increase in interest rates, but to remain at a high level of around 12%.

According to the report, demand for labour force is still expected to remain high, but the possibilities for an extensive increase in the labour supply are increasingly limited due to the demographic crisis.

The expected minimal drop in unemployment for the period 2024-2025 rests entirely on the prospect of attracting some of the inactive persons back into the workforce or by attracting labour from other countries.