The Bulgarian Economy Prior To Euro Area Accession: Macroeconomic Convergence, Inflationary Dynamics, Fiscal Developments and Sectoral Adjustment

Dimitar Zlatinov, Victor Yotzov, Grigor Sariiski, Iana Paliova, Stela Raleva and Yordan Dimitrov

Economic Studies journal, 2026, issue 6, 3-30

Abstract: Economic activity in Bulgaria in 2025 continues to increase, but with stronger dependence on domestic sources of growth and a weakening external position. Growth is sustainable in pace but unbalanced in structure, with final consumption leading, net exports deteriorating and investment still insufficient for a productivity-led trajectory. Inflation is primarily internally generated, and its reduction requires higher productivity, competition and budget discipline, not only temporary price measures. Low unemployment conceals labour shortages, so activation of inactive persons and upgrading of skills are central to growth potential. Fiscal risks are increasing as the key problem is not the debt level, but recurrent expenditure financed by new debt amid weak public-investment efficiency. The external sector becomes a main macroeconomic risk, while banking stability is high, but rapid credit and housing-market dynamics require preventive supervision. Euro area accession marks a major institutional shift, ending Bulgaria’s currency board arrangements and integrating it into ECB monetary policy. Yet membership does not automatically boost growth, investment, or external sustainability, especially as domestic prices and costs are rising faster than in many trading partners. Therefore, policy should shift from stimulated demand to sustainable growth based on productivity, skills, investment and high-value exports.

JEL-codes: E60 E62 F41 O47 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://archive.econ-studies.iki.bas.bg/2026/2026_06/2026_06_01.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2026:i:6:p:3-30

Access Statistics for this article

More articles in Economic Studies journal from Bulgarian Academy of Sciences - Economic Research Institute Contact information at EDIRC.
Bibliographic data for series maintained by Diana Dimitrova ().