site.btaCouncil for Economic Analyses Urges Close Monitoring of Bulgaria’s Economic Activity as Eurozone Accession Nears

Economic activity in Bulgaria should be closely monitored by the government and the Bulgarian National Bank (BNB) as the country moves towards joining the eurozone, according to a new analysis by the Bulgarian Council for Economic Analyses (CEA) published on Wednesday.

The report, authored by Plamen Nenov, compares the economic dynamics of Slovenia and Croatia, two nations with similar characteristics, following their respective adoptions of the euro.

The analysis notes the potential need for a more conservative fiscal policy to cool the economy, as well as a more aggressive macroprudential policy to limit the pace of credit growth. In the event of inflationary pressures similar to those observed in Croatia, targeted measures will be required for poorer households, who are more exposed to potential inflationary effects and unable to benefit directly from increased labour income—primarily pensioners, according to the report.

CEA experts further highlight that increased financial integration associated with the adoption of the euro represents a strong opportunity for the implementation of policies to support financial development, such as improving the attractiveness of the Bulgarian Stock Exchange for local and foreign investors.

In both cases, once each country (Slovenia or Croatia) adopted the euro, faster growth in GDP, employment, labour income, consumption, and investment was observed in comparison to the other. When Slovenia introduced the euro, its economy began to grow faster than Croatia’s. When Croatia adopted the euro, its economy began to catch up with Slovenia’s. No inflationary effect was recorded in Slovenia, while Croatia saw a moderate rise in prices—significantly less than the increase in real labour incomes.

The analysis underlines that these trends cannot be interpreted as definitive proof of a causal relationship but instead outline a possible direction of impact and are therefore important for the public debate over the potential economic effects of adopting the single currency in Bulgaria.