site.btaUPDATED Domestic Factors Drive Bulgaria’s Faster Economic Growth, Says Central Bank Governor

In an interview for BTA taken on Friday during the International Monetary Fund (IMF) and World Bank Annual Meetings, Bulgarian National Bank (BNB) Governor Dimitar Radev said that domestic factors are the main contributors to the IMF's upward revision of Bulgaria's economic growth forecasts. On October 14, the Fund released its World Economic Outlook report, which predicts that Bulgaria’s economic growth will quicken to 3% in 2025 and 3.1% in 2026 compared to 2.8% in 2024.

The main factors favouring economic dynamics that Radev highlighted are the country's stable banking system, low public debt, and active private sector. Bulgarian businesses remain the engine of growth—flexible, innovative, and sustainable, the BNB Governor said.

Radev said that the expected acceleration of inflation to 3.6 %this year and 3.4% in 2026 is temporary and the result of base effects and changes in regulated prices. He stressed that it is important for fiscal policy not to conflict with monetary policy, as inflation will continue to ease, if the balance is maintained.

The BNB Governor reported that sustainability of economic growth in conditions of high uncertainty and limited resources was the main topic of discussion during talks between leading financiers from around the world, which took place this week in the US capital. He said that interest rates in most leading economies, including the euro area, are already at or close to neutral territory, which calls for a more balanced monetary stance. In contrast, fiscal space remains very limited. The overall message is that stability requires more consistency and coordination between policies – both at the national and global levels.

Bulgaria remains among the EU Member States with the lowest debt, which is Bulgaria's main comparative advantage. At the same time, however, fiscal discipline is gradually loosening and the deficit is growing. According to the baker, the sustainability accumulated over the years, especially in the period up to 2020, is about to be compromised and must be protected through a moderate and predictable budgetary policy.

The process of Bulgaria's accession to the eurozone is naturally of interest to the forum participants, as Bulgaria has managed to maintain relative macroeconomic stability in a complex domestic and external environment. This step is seen as logical and a major success but also as a test of policy sustainability, the BNB Governor shared. He emphasized that the eurozone is not an end goal but a commitment to predictability, institutional maturity, and trust.

Following is the full interview.

Mr Radev, you are representing Bulgaria at the annual meetings of the IMF and the World Bank, which bring together leading financiers from around the world. What are the main topics of discussion?

The focus is on sustainable growth in conditions of high uncertainty and limited resources. Interest rates in most leading economies, including the euro area, are already at neutral or close to neutral territory, implying a more balanced monetary stance. In contrast, fiscal space remains very limited. The overall message is that stability requires more consistency and coordination between policies, both at the national and global levels.

After the previous meeting in April, the big news for Bulgaria was the approval of our country's accession to the euro area. Which aspects of this process peak your colleagues' interest? Is Bulgaria's weight changing at such meetings?

The interest is logical because Bulgaria has maintained relative macroeconomic stability in a complex domestic and external environment. Our colleagues view our accession as a logical step and a major success, but also as a test of policy sustainability. The eurozone is not an end goal, but a commitment to predictability, institutional maturity, and trust.

The IMF has raised its growth forecasts for the Bulgarian economy for this year and next. To what extent does this upward revision reflect the general trend of more optimistic expectations for the global economy, and to what extent is it due to factors specific to our country?

This is partly a reflection of the relatively better global economic environment, but the main contribution is domestic – a stable banking system, low public debt, and an active private sector. Bulgarian businesses remain the engine of growth – flexible, innovative, and sustainable. Our task is to provide them with a predictable environment in which they can continue to invest and create value.

Inflation forecasts indicate a slight acceleration in the short term. What is behind this trend and is it expected to persist?

The expected acceleration is temporary, resulting from base effects and changes in regulated prices. The main medium-term trend is toward a gradual slowdown. It is important that fiscal policy does not conflict with monetary policy. If the balance is maintained, inflation will continue to ease.

During the discussions in Washington, IMF representatives noted the limited fiscal space in many countries. Where does Bulgaria stand?

Bulgaria remains among the European Union Member States with the lowest debt—this is our main comparative advantage. At the same time, fiscal discipline is gradually loosening, and the deficit is growing. The sustainability accumulated over the years, especially in the period up to 2020, is about to be compromised. It must be protected through a moderate and predictable budgetary policy, because our long-term stability depends on it.

In its latest economic bulletin, the BNB reports accelerated annual deposit growth of 11.8% prior to entry into the eurozone. Do you anticipate a reversal of this trend after January 1, with a portion of these funds being directed toward economic turnover?

Yes, it is possible that some of these funds will gradually be directed towards investment and consumption. However, this depends on confidence in the political and economic framework. Deposit growth is an indicator of stability and caution – something that is better to have than to lack.