site.btaCouncil for Economic Analyses Highlights Medium-Term Risks in Growth Structure, Investment, Demographics

The Bulgarian Council for Economic Analyses (BCEA) says in its Annual Report 2025 that while the short-term dynamics are positive, there are significant medium-term risks related to the structure of growth, investment and demographic constraints. The BCEA presented the report to the Council of Ministers on March 31, the Council reported on Tuesday.

The report includes an analysis of the current state of the Bulgarian economy, as well as analytical studies and recommendations on specialized topics prepared by BCEA members in 2025, which identify and indicate medium-term and long-term risks and opportunities facing the national economy. 

The analysis presents, in a synthesized format, the evolution of several key macroeconomic indicators related to economic growth, the labour market, inflation, the country's external position, and public finances. The Bulgarian economy reported stable growth of 3.1% last year and ranks among the best-performing within the EU27, placing sixth. At the same time, the structure of economic growth remains unbalanced, dominated by growth in domestic demand, and in particular consumption, with relatively weak investment activity and a negative contribution from exports, BCEA points out.

The slowdown in labour productivity, combined with limited capital accumulation, calls into question the sustainability of the real convergence process. The labour market is characterized by low unemployment rates, as well as by tightening supply-side constraints due to unfavourable demographic trends. There is a risk of stronger upward pressure on wages, which, if productivity does not rise fast enough, could adversely affect unit labour costs and the economy's competitiveness.

In December 2025, average annual inflation, as measured by thе Harmonized Index of Consumer Prices (HICP), stood at 3.5%, with risks of further increases from continued demand pressures as well as adverse foreign policy factors. 

Тhe country's current account balance was negative and stood at EUR -6.9 billion (5.9% of GDP) at the end of 2025, mainly due to a widening trade deficit. If this trend persists in the coming years, it could become a factor in increasing external macroeconomic imbalances, especially if growth continues to be based primarily on domestic consumption, the Council warns. 

The document also says that fiscal policy remained procyclical and pro-inflationary, with a budget deficit on a cash basis
standing at EUR 3.5 billion, or 3.0% of GDP. The presence of a budget deficit amid favourable economic conditions, strong domestic demand and a tight labour market suggests that a significant portion of it is structural in nature, rather than due to temporary cyclical factors, BCEA said. 

Special attention in the report is paid to an analysis of the dynamics of wages in Bulgaria. The analysis raises the question of whether their growth is excessive. According to BCEA, such an assessment should not be based on the nominal growth of wages, as it can be distorted by inflation. A more appropriate indicator is the share of wages in gross value added, which takes into account both inflation and the growth of labour productivity. 

In its conclusions, the Council states that the increase in labour remuneration is part of the process of economic convergence, but its sustained continuation requires accelerated growth in productivity and investment, as well as adaptation of fiscal policy to higher labour costs in the services sector.

The 2025 Annual Report will be presented at the annual conference of the Bulgarian Council for Economic Analyses, which will be held on June 22 and 23 at the St Kliment Ohridski Sofia University.

The full text of the report in English is available on the BCEA website.