IMF Executive Board Concludes 2025 Article IV Consultation with Bulgaria
IMF News, November 24, 2025
Source details
- Canonical URL
- IMF Executive Board Concludes 2025 Article IV Consultation with Bulgaria
Other formats
Bibliographic details
- Published: November 24, 2025
Key findings on the economy and outlook
- Domestic demand is driving a robust expansion: GDP grew by 3.4 percent in 2024 and by 3.2 percent in the first half of 2025.
- Near-term growth outlook: growth is projected to remain at around 3 percent in 2025 and 2026.
- Inflation: headline inflation is projected to average around 3½ percent in 2025 and 2026, before declining; inflation accelerated in early 2025 and remains elevated.
- Labor market: record low unemployment with tight labor market conditions and rapidly growing real wages.
- Credit and external: strong credit growth is underpinning private consumption; external demand is subdued with the current account projected to remain negative in the near term.
- Euro adoption: adoption of the euro is a major milestone expected to strengthen institutional credibility, investor confidence, and reduce currency risk and transaction costs; benefits already visible in narrowing sovereign spreads and recent credit rating upgrades.
Executive Board assessment and risks
- Economic momentum is strong, the labor market is tight, and inflation is elevated.
- High wage growth has driven income convergence; productivity growth is lagging.
- External position in 2024 is assessed to be broadly in line with fundamentals and desirable policy settings.
- Main risks to the outlook: domestic policy uncertainty, domestic demand pressures, and heightened external volatility.
- Current account: projected to remain negative in the near term.
Fiscal policy recommendations and public finance issues
- Fiscal stance: fiscal policy is expected to remain expansionary in 2025–26; considering underlying demand strength and cyclical position, a neutral stance is recommended, achievable through a combination of expenditure and revenue measures.
- Specific fiscal recommendations:
- Moderating public wage growth and benefit indexation to generate significant fiscal savings and ease inflationary pressures.
- Increase consistency and transparency of public policies to reduce distortions and strengthen credibility of fiscal reporting.
- Greater transparency regarding substantial recapitalization of state-owned enterprises (SOEs).
- Pension reform priorities:
- Focus on sustainability and adequacy as the deficit of the pay-as-you-go pension scheme is widening and population aging will increase the shortfall.
- Strengthen financial sustainability by increasing contribution revenues; a key measure is removing the cap on insurable income, which has not kept up with wage growth.
- Continue efforts to strengthen the system's second and third pillars and improve adequacy to reduce old-age poverty.
- Revenue policy: the revenue-generating capacity of the flat-tax regime appears insufficient; in the medium term, more revenue could be raised by increasing tax rates for both personal and corporate income and moving to progressive income taxation.
- Fiscal risks: while overall risk of debt distress remains low, public debt is increasing due to sustained deficits and sizeable recapitalizations of SOEs; spending pressures from aging, defense, infrastructure, and the energy transition will require fiscal space.
Financial sector and macroprudential policy
- Financial sector resilience: the financial sector remains resilient.
- Credit risks: rapid growth of consumer credit, particularly mortgage loans, has increased systemic risks in the real estate market.
- Policy recommendations:
- The BNB’s close monitoring of the housing market is welcome.
- With the drop in reserve requirements following euro adoption, liquidity may flow into lending and further propel household credit; macroprudential policy will need to remain nimble.
- Proactive borrower-based macroprudential measures are recommended to manage credit market risks.
Structural reforms and long-term priorities
- Raise living standards: durably raising living standards will require continued structural reforms, enhanced governance, and strategic investments in human and physical capital.
- Growth dividends: scaling up quality public investment and reducing structural policy gaps—particularly through the Resilience and Recovery Plan (RRP)—could yield substantial benefits.
- Governance and institutional quality: improving governance and institutional quality is essential for long-term growth and building trust.
- Demographics and productivity: addressing productivity and demographic challenges requires sustained investment in human capital and increased labor market participation.
- Energy transition: reform is crucial for a more resilient, efficient, and cleaner energy sector, with stronger governance and reduced fiscal vulnerabilities.
Selected Economic Indicators, 2024–26 (annual percent change, unless otherwise indicated)
- Real GDP: 2024 — 3.4; 2025 — 3.0; 2026 — 3.1
- Real domestic demand: 2024 — 4.7; 2025 — 7.1; 2026 — 3.8
- Public consumption: 2024 — 3.6; 2025 — 5.3; 2026 — 1.7
- Private consumption: 2024 — 4.9; 2025 — 8.0; 2026 — (not provided)
- Gross capital formation: 2024 — 5.9; 2025 — 1.3; 2026 — (not provided)
- Net exports 1/ (contribution to GDP growth): 2024 — -1.1; 2025 — -3.6; 2026 — -0.7
- Exports of goods and services: 2024 — 1.8; 2025 — -1.6; 2026 — (not provided)
- Imports of goods and services: 2024 — 3.9; 2025 — 4.8; 2026 — 5.1
- Resource utilization — Potential GDP: 2024 — 2.9
- Output gap (percent of potential GDP): 2024 — 0.4; 2025 — 0.6; 2026 — (not provided)
- Unemployment rate (percent of labor force): 2024 — 4.2; 2025 — 3.5; 2026 — (not provided)
- Price — GDP deflator: 2024 — 7.2; 2025 — 6.0; 2026 — 4.4
- Consumer price index (HICP, average): 2024 — 2.6
- Consumer price index (HICP, end of period): 2024 — 2.1; 2025 — 4.0
- Fiscal indicators (percent of GDP) — General government net lending/borrowing (cash basis): 2024 — -3.0; 2025 — -3.4; 2026 — -3.5
- General government primary balance: 2024 — -2.8
- Cyclically adjusted overall balance (percent of potential GDP): 2024 — -3.2; 2025 — -3.7
- General government gross debt: 2024 — 23.8; 2025 — 28.4; 2026 — 29.9
- Monetary aggregates — Broad money: 2024 — 8.7; 2025 — 5.7; 2026 — 9.1
- Domestic private credit: 2024 — 14.5; 2025 — 13.1; 2026 — 11.8
- External sector (percent of GDP) — Current account balance: 2024 — -3.8
- o/w: Merchandise trade balance: 2024 — -4.8; 2025 — -7.8; 2026 — -7.6
- Net international investment position: 2024 — -4.4; 2025 — -4.9; 2026 — -4.1
IMF Press Release No. 25/384, November 24, 2025.