Bulgaria’s economic growth is expected to accelerate before easing, while remaining above the EU and euro area averages, EY said in a statement received by BTA on Thursday.
The company’s economic analysis team forecasts growth of 2.9% in 2026, accelerating to 3.5% in 2027 before easing to 3% in 2028. The figures are from its October 2026 forecast.
Bulgaria’s economic growth is expected to remain positive under all three scenarios considered for 2027: 3.5% in the baseline scenario, 2.9% in the adverse scenario and 3.7% in the optimistic scenario.
Growth Above the EU Average, but Higher Inflation
The baseline forecast puts Bulgaria’s growth above the rates expected for the EU and euro area throughout 2026-2028. EY projects EU growth of 1.4% in 2026, 1.7% in 2027 and 1.4% in 2028. The corresponding forecasts for the euro area are 1%, 1.4% and 1.3%.
Average annual consumer price inflation in Bulgaria is forecast at 5.4% in 2026, 4.4% in 2027 and 2.5% in 2028. Annual inflation in September 2026 was 5.6%. The analysis places Bulgaria among Southern European economies facing stronger price pressures and the impact of higher energy costs on tourism-related services.
Energy Risks Key to Inflation
EY’s baseline scenario projects average annual inflation in Bulgaria of 4.4% in 2027. Under an adverse scenario involving a prolonged energy shock, inflation could reach 7%. The optimistic scenario projects a decline to 3.1%. The analysis indicates that countries in Central and Eastern Europe are more sensitive to fluctuations in energy prices owing to energy’s greater weight in their consumer baskets and the amplifying effect of exchange-rate movements.
European Outlook: Resilient Growth amid Persistent Price Pressures
Euro area inflation reached 3.8% in September 2026, driven primarily by energy prices, while core inflation remained relatively stable. Inflation is expected to stay close to 3.8% over the coming months before gradually declining to 2% by mid-2028. Average annual inflation in the euro area is forecast to be 3.1% in 2027.
Despite higher interest rates and geopolitical uncertainty, euro area growth is expected to remain resilient, supported by fiscal policy and investment in artificial intelligence (AI). Household consumption, however, is expected to slow as higher inflation erodes purchasing power, according to EY economists.
Risks in Both Directions
The duration of the conflict in the Middle East and fluctuations in energy prices remain the principal sources of uncertainty for Europe’s economic outlook. Other downside risks include geopolitical escalation, trade fragmentation and higher tariffs, further disruptions to energy supplies, fiscal pressures, sharp corrections in capital markets and physical risks associated with climate change.
Faster adoption of AI, infrastructure and defence investment, structural reforms and lower trade barriers could support a more favourable outlook, the statement said.
Interest Rates to Remain Volatile for Longer
Persistent inflationary pressure is also changing expectations for monetary policy, EY’s analysts said. Following the interest rate increases in September, one further rise in key rates is expected. Market expectations as of October 2026 suggest even stronger tightening. For European companies, this means financing costs are likely to remain a significant factor in investment decisions. Households will continue to face pressure from borrowing costs and weaker growth in purchasing power.
Weaker Euro, Uneven Recovery
The euro has weakened amid higher energy prices and fiscal concerns, adding to inflationary pressure through more expensive imports, the statement said. Currency movements across Europe remain mixed: the Polish zloty and Swedish krona have weakened against the euro, the Norwegian krone has strengthened thanks to Norway’s position as a hydrocarbon exporter, and the Romanian leu is under renewed pressure amid political uncertainty, high inflation and a narrowing interest rate differential.
Recovery is also proceeding at different speeds across European economies. Germany is recovering gradually, while growth in France remains weak. Spain and Poland continue to outperform most of the EU’s large economies, despite an expected slowdown. EY forecasts growth in 2027 of 1.2% for Germany, 0.7% for France, 1.9% for Spain and 3.1% for Poland.
Bulgaria’s projected growth of 3.5% exceeds these rates and the EU average, but is accompanied by higher inflation than in the euro area.
Factors Supporting Europe’s Economic Resilience
Sentiment surveys paint a more positive picture than economic activity data, but EY’s short-term estimates indicate that growth continued in the third quarter of 2026 despite higher energy prices and tighter financial conditions. Fiscal expansion in Germany and the effects of the AI investment boom in the US are among the factors that could help explain Europe’s resilience to the energy shock.
Investment and exports are expected to remain relatively resilient, supported by fiscal policy and AI-related spending. Household consumption growth in the euro area, however, is expected to slow from 1.5% in 2025 to 1% in 2026 and 0.7% in 2027 as inflation constrains real incomes.
The European outlook therefore combines continued positive growth with weaker consumption, a higher cost of capital and substantial differences between countries.
EY Forecasts Bulgarian Growth of 2.9% in 2026, 3.5% in 2027 THE NEWS FROM BULGARIA – NEWS AGENCY 2009-2025 2026-10-22 10:51:44
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