site.btaOECD Cuts Bulgaria's 2026 Growth Forecast to 2.5% Amid Inflation, Higher Energy Costs

The Organisation for Economic Co-operation and Development (OECD) expects Bulgaria's economic growth to slow to 2.5% in 2026 and 2.3% in 2027 amid higher inflation, rising energy prices and weaker consumption.

According to the organization's latest Economic Outlook report, published on Wednesday, higher energy prices resulting from the conflict in the Middle East will reduce real incomes and put pressure on domestic demand in Bulgaria. Consumption growth is expected to slow as wage increases and social transfers also moderate.

The OECD forecasts that investment in 2026 will be supported mainly by public spending and EU funds before private investment gradually recovers as political and geopolitical uncertainty subsides.

The organization warns that higher energy prices create a risk of persistently elevated inflation. Annual inflation is expected to reach 4.3% in 2026 before easing to 3.4% in 2027.

According to the OECD, Bulgaria remains vulnerable to external energy shocks because of the relatively high share of energy costs in the economy. The conflict in the Middle East has already led to higher fuel and wholesale electricity prices, although the impact remains less severe than during the energy crisis following the war in Ukraine.

The organization notes that the government has responded with support measures for households and businesses, including subsidies for low-income households, relief for the transport sector and compensation for energy-intensive companies.

The report also notes that borrowing costs for households and businesses have declined slightly following Bulgaria's accession to the euro area in January 2026.

The OECD, however, warns that the budget deficit has exceeded 3% of gross domestic product due to rising spending on social and healthcare services, higher public-sector wages and increased investment expenditure.

The organization recommends a credible medium-term fiscal consolidation strategy to contain the risk of economic overheating and ensure the sustainability of public finances amid population ageing, defence spending and the green transition.

According to the report, structural reforms in the energy sector are also needed, including accelerating renewable energy projects, expanding electricity transmission infrastructure and investing in energy storage.

The Middle East Conflict Becomes Main Risk to Global Growth and Inflation

The escalating conflict in the Middle East has become the key factor shaping global economic prospects, triggering an energy shock that is intensifying inflationary pressures and weighing on economic growth, the OECD says in its Economic Outlook report.

According to the organization, rising energy and commodity prices from the Gulf region are already affecting inflation, real incomes and global economic activity.

Given the uncertainty surrounding the development of the conflict, the OECD presents two scenarios for the global economy.

The first assumes a temporary disruption, with energy production and trade gradually recovering from mid-2026 and market turbulence easing.

The second envisages prolonged disruptions, with restrictions on energy production and exports from the region continuing into 2027, leading to persistently high energy prices, supply risks and tighter global financial conditions.

"The global economy entered 2026 with robust momentum, but the outlook has weakened significantly since the start of the conflict in the Middle East, with effects likely to be felt for some time. The longer the disruptions last, the larger the economic and social costs become," OECD Secretary-General Matthias Cormann said.