OECD Forecasts Bulgaria's Economic Growth and Eurozone Entry by 2026

The Organization for Economic Co-operation and Development (OECD) has projected that Bulgaria will join the eurozone in 2026. The organization expects the country's economic growth to rise from 2.3% in 2024 to 2.8% in 2025, before moderating to 2.6% in 2026. These figures reflect a downward revision from earlier forecasts made in May, when the OECD had predicted slightly higher growth rates of 2.5% in 2024 and 2.9% in 2025.

Inflation is expected to follow a similar downtrend. The OECD revised its inflation forecast for 2024 to 2.4%, with a slight increase to 2.7% in 2025, before it is anticipated to ease to 2.5% by 2026. This represents a reduction from its spring projections, which anticipated higher inflation rates of 3% for 2024 and 2.8% for 2025.

Despite these adjustments, the OECD's report suggests that Bulgaria's economy will be supported by low unemployment and stable real income growth, which should drive household consumption. Unemployment is projected to remain low, at 4.2% in 2024, with slight reductions to 4.1% in 2025 and 4% in 2026.

Investment in Bulgaria has slowed recently, but the situation is expected to improve as EU funding resumes. Exports are predicted to recover as economic conditions in the EU improve. While inflation is easing, the report highlights that wage pressures remain high, and continued political uncertainty may hinder necessary reforms and investments.

In terms of fiscal policy, the OECD notes that Bulgaria's government has expanded spending on wages, pensions, and social benefits, which has contributed to widening the fiscal deficit. However, fiscal consolidation is necessary to manage demand pressures and ensure sustainable public finances. The organization stresses that further reforms are needed to...