Bulgaria's Euro Adoption Expected to Accelerate Wage Growth, Economists Predict

Bulgaria’s upcoming adoption of the euro in 2026 is expected to significantly accelerate wage growth, according to economists familiar with the experiences of other countries that have already joined the eurozone. However, to ensure that this wage increase remains sustainable, it will need to align with labor productivity growth, as emphasized by Prof. Dr. Viktor Yotsov during a recent discussion at the Bulgarian Academy of Sciences' Institute for Economic Research. He cautioned that if productivity growth lags behind, it could lead to initial inflation, which might ultimately erode the real wage gains.

The discussion, part of a roundtable event, presented the findings of a research project titled "Adaptation of the labor market in the conditions of membership in the eurozone," which is funded by the Research Fund of the Ministry of Education and Science. The project, led by Sofia University "St. Kliment Ohridski" in collaboration with the Institute of Higher Education at the Bulgarian Academy of Sciences and the University of Reading in the UK, looks at socio-economic dynamics, technological modernization, and educational restructuring in the context of Bulgaria's future membership in the eurozone.

Prof. Yotsov analyzed labor market data from 11 Central and Eastern European countries, six of which are in the eurozone. He found that significant improvements in employment, wages, and productivity post-2000 were largely driven by EU integration rather than the adoption of the euro itself. Structural reforms, investments in human capital, and access to the EU's single market, rather than the currency change, were the primary drivers of convergence in these countries.

Assoc. Prof. Dr. Ralitsa Simeonova-Ganeva from Sofia University presented additional findings, highlighting that Bulgaria’s labor market is expected to continue facing challenges. These include a shrinking workforce, an increasing share of highly educated workers, and a shortage of labor with secondary education, which will exacerbate social and economic difficulties. Additionally, demand for workers with primary or lower education is expected to weaken.

To cope with these labor shortages, Bulgaria will likely see increased investment in automation, digitalization, and new technologies. The adoption of the euro is also anticipated to have positive effects, including reduced currency risk, improved access to financing, lower interest rates, and enhanced integration with European markets. As part of the research project, a new Joint Research Center focused on innovative labor market policies in Bulgaria has been established at the Institute of Industrial Economics at the Bulgarian Academy of Sciences.