Bulgaria’s Economic Growth Outpaces Expectations, Inflation to Determine Eurozone Path

In the fourth quarter of 2024, Bulgaria's economy showed a stronger performance than anticipated, expanding by 3.4% in real terms compared to the same period in 2023. This resulted in an overall economic growth of 2.8% for the entire year, according to preliminary data from the National Statistical Institute (NSI). UBB Chief Economist Emil Kalchev noted that this growth was mainly driven by final consumption, which rose by 4.3% in real terms, accounting for 77.8% of GDP. Despite a 1.1% decline in investments, the smaller share of investments in GDP, at just 17.2%, meant they did not significantly hinder overall economic growth. Furthermore, net exports remained positive, contributing about 3.5% to GDP, despite a slight decline in exports and a marginal increase in imports.

On the production side, services, construction, and industry were the primary contributors to growth. Services experienced a significant expansion of 3%, driven by its dominant share of 64.2% in GDP. The construction sector saw the fastest growth at 5.2%, although its smaller share of 3.6% in GDP meant its overall contribution was limited. The industrial sector also showed positive momentum, growing by 1.2%, a rebound from the 5.4% decline in 2023. Agriculture, however, contracted by 7%, but its minor share of 2.8% in GDP meant it had a limited impact on the overall economic performance.

Within the services sector, all subcategories saw real growth, with the most notable increases in government services, education, human health, and social work, which grew by 5.5%. Other key sectors, such as trade, transport, warehousing, and hospitality, also saw growth of 3.5%. The financial and insurance sectors experienced a more moderate growth of 2.9%. While areas like culture, sport, real estate, and scientific research grew, their growth rates were slower, ranging from 0.5% to 0.8%.

Kalchev pointed out that, based on Eurostat's data, Bulgaria is on track to meet the price stability criterion for entering the eurozone, with a slight difference of 0.1 percentage points in average inflation over the last 12 months. As a result, Bulgaria has submitted a request for the preparation of special convergence reports from the European Commission (EC) and the European Central Bank (ECB). Kalchev emphasized that inflation data for the period from February to April will be critical for Bulgaria’s progress toward meeting the eurozone entry criteria.