Bulgaria’s economy demonstrated stronger-than-expected growth in the final quarter of 2024, according to an analysis by United Bulgarian Bank (UBB) based on data from the National Statistical Institute (NSI). The country’s GDP expanded by 3.1% in real terms year-on-year in the fourth quarter of 2024, contributing to an overall growth rate of 2.4% for 2024, as per revised preliminary data from previous quarters.
Economic activity in the last quarter was primarily driven by final consumption, which increased by 5.8% in real terms, accounting for 79.9% of GDP. In contrast, investment growth remained subdued, rising by just 0.7% compared to the same period in 2023. Given its much smaller share of 23% in GDP, investment had a limited impact on overall economic growth. Meanwhile, exports fell by 3.2%, while imports saw a modest increase of 1.2%.
The analysis also highlighted Bulgaria’s improving prospects for joining the eurozone. Inflation in the country has shown clear convergence with eurozone levels, with the gap between them narrowing significantly as of December 2024. UBB expects data for January to confirm compliance with this key requirement. According to the latest convergence reports from the European Commission and the European Central Bank, price stability had been the only remaining formal obstacle to Bulgaria’s entry into the eurozone.
However, political instability has led to increased government spending, raising concerns that the budget deficit could exceed 3% of GDP. UBB’s Chief Economist, Dr. Emil Kalchev, noted that it was now up to the newly formed coalition supporting the government to curb expenditures and ensure compliance with the Maastricht criteria necessary for eurozone membership.
Labor market conditions remained favorable, with unemployment declining to 3.8% as of December 2024. Wage growth continued, with the average monthly salary rising by 13.7% compared to December 2023. In both the public and private sectors, salaries saw steady increases, with the largest growth recorded in “Real estate operations” (20.2%), “Professional activities and scientific research” (16.4%), “Transport, storage and communications” (16.4%) and “Culture, sports and entertainment” (16.4%).
Meanwhile, inflationary pressures intensified at the beginning of 2025. Harmonized inflation rose to 3.8% in January compared to the same month the previous year, up from 2.1% in December 2024. Consumer inflation based on the national methodology also accelerated to 3.7% on an annual basis, compared to 2.2% in December 2024. The main contributors to rising prices were food, housing, restaurants and hotels, as well as cultural services. Dr. Kalchev expects moderate inflationary growth to continue in the coming months, with occasional fluctuations similar to those seen in January. (Novinite)