Uncertainties Surround Bulgaria's Eurozone Entry as Inflation and Politics Stir Concerns

Bulgaria’s prospects of joining the eurozone in January 2026 remain within reach, according to the latest analysis from ING’s research unit, ING Think. However, experts caution that some uncertainties are emerging that could affect the timeline.

The analysis, titled "Bulgaria: Euro adoption is within reach, but not yet a fact," points out that while the forecast for Bulgaria's eurozone accession remains positive, inflation is becoming a growing concern. ING forecasts that inflation will reach 4.6% by the end of this year, with a slight decline to 3% in 2024. One of the primary factors driving inflation is the liberalization of the electricity market, which could add political complexity to the process of meeting the necessary criteria for adopting the euro.

Political stability is highlighted as the key factor in ensuring the successful adoption of the euro. The analysis notes that any potential shifts in the political landscape, such as the entrance of new parties into the National Assembly following the recalculation of election results, could introduce additional uncertainties. The decision by the Central Election Commission to set a new four percent threshold for parliamentary representation has led to the redistribution of seats, allowing the Velichie party, which had initially failed to pass the threshold, to secure ten seats. These developments could bring more political turbulence, potentially impacting Bulgaria's progress toward euro adoption.

Looking at Bulgaria’s economic outlook, ING remains optimistic. The bank forecasts a stable growth rate of 2.6% in 2025, driven by recent wage increases and expansionary fiscal policies that are expected to support both private and public consumption. Additionally, the country’s integration into broader regional projects, such as the Vertical Gas Corridor, NATO-led infrastructure upgrades, and the Three Seas Initiative, is expected to bring early benefits to productivity and activity.

However, political instability continues to pose risks to investment, with the analysis noting that any political uncertainty could undermine confidence in the economy. On the industrial front, Bulgaria faces challenges, with industrial activity weakening due to struggles among key trading partners, such as Germany and Romania.

In conclusion, while Bulgaria’s path to joining the eurozone remains probable, the country must navigate these emerging political and economic challenges for its forecast to become a reality.