Inflation in Bulgaria is 0.1 points away from eurozone threshold

Bulgaria is likely to meet the eurozone inflation criterion in the first months of 2025. By the end of last year, the indicator monitored by the EC and the ECB was already noticeably approaching the acceptable limit for the currency union. However, according to the latest data for December, Bulgaria still does not meet it – missing it by only 0.1 points.

This is what the most recent statistics from the European Statistical Office (Eurostat), published on Friday, show.

The average annual inflation data for the period December 2023 - December 2024 is the indicator used by the European Central Bank (ECB) and the European Commission (EC) for the convergence assessment.

Currently, the inflation criterion is the only one that the country does not meet for the coveted eurozone membership.

The inflation index in Bulgaria continued to slow down in December when it was 2.6%. At the same time, the one in Europe is rising, after in October and November it was 0.93% for the three best-performing countries in terms of inflation. In December, it was already 1%, therefore the permissible level becomes 2.5% - or 0.1 points below the latest values ​​in Bulgaria.

The three countries with the lowest inflation in the European Union for the second month in a row are Finland, Lithuania and Italy.

If Finland is not counted

In their regular report from June last year, the two European institutions excluded Finland from their calculations due to “exceptional factors.” If we now exclude that country again in the calculations and replace it with the next EU country with the lowest inflation – Denmark – then the permissible limit becomes 2.6%, or equal to the values ​​in Bulgaria.

In their report, the ECB also states that it is possible that Denmark could also be excluded from the calculations due to "a large difference in inflation dynamics" compared to the euro area. However, even if we exclude Finland and take Ireland instead of Denmark, the permissible limit remains 2.6%.

Is it time to request an extraordinary convergence report on the euro?

Just a day before the publication of the European statistical report, former Finance Minister Lyudmila Petkova said that it was possible that Bulgaria would request an extraordinary convergence report by the end of the month – and these were also the expectations in Brussels.

You may recall that in July of last year, the Bulgarian parliament obliged the Ministry of Finance to request an extraordinary convergence report no later than two weeks after Bulgaria fulfills all the criteria for admission to the eurozone.

The condition was that if this happened in 2024, the government would necessarily request a date for accession of July 1, 2025, although several financial institutions, including the Ministry of Finance itself, indicated January 1, 2026, as a more realistic date for introducing the euro in Bulgaria.

If the newly formed regular government, led by Rosen Zhelyazkov, decides to submit a request, then compiling an extraordinary assessment by the ECB and the EC will take some time - at best, several months. Separately, the uncertainty surrounding the 2025 Budget, which still might be withdrawn, and the emerging budget deficit resulting from it could turn out to be a whole new problem.

Translated by Tzvetozar Vincent Iolov