Allianz expects wages and credits to keep inflation in Bulgaria above 2%

The forecast is that in the next two years the country’s economy will rely on consumer spending

16:32 15.10.2024 ~ 2 min read

Inflation in Bulgaria will hover above 2% over the next two years, supported by wage and credit growth, and consumption will remain the engine of the economy during this period. This is the prediction made by the analysts of Allianz Trade, a company specializing in credit risk insurance.

According to them, the real growth of the gross domestic product (GDP) of Bulgaria this year will be 2.2%, driven by domestic demand - consumer, public and capital expenditures, and next year it is forecast to grow to 2.7%. Expectations for 2026 are that growth will again exceed 2.5%.

The company points out that during all these years the economy will

rely exclusively on sustained private consumption driven by strong wage growth."

In the event of a decrease in interest rates and an increase in public spending, including via European funding, an increase in investment activity is expected, which will further stimulate the economy.

Like the economy, Allianz Trade experts forecast inflation to remain above 2% for the next two years due to continued strong upward pressure on wages and ever-accelerating credit growth.

Analysts see an "adequate business environment" in Bulgaria and a "cautious fiscal policy" with deficits below 3% and a low debt/GDP ratio. With these arguments, Allianz Trade reduces the risk of late payments and bad debts when conducting transactions with Bulgarian companies.

Political crisis

The company considers the political impasse in Bulgaria as a challenge, even if the economy is still growing.

The inability to form a stable government is a growing concern. There are also no substantial expectations for a successful resolution of the crisis after the seventh parliamentary elections since 2021, scheduled for the end of October 2024," the Allianz Trade report noted.

The report states that the lack of a stable government threatens to delay a number of policies, including Bulgaria's goal of joining the eurozone in 2025.

Translated by Tzvetozar Vincent Iolov