Preface: GDP in 2025
These forecasts are prepared in accordance with Article 6, paragraph 1, item 2 of the Fiscal Council and Automatic Corrective Mechanisms Act.
The Fiscal Council’s forecast for economic growth in 2025 was 3.2%. In terms of key indicators, it was higher than the MF autumn forecast. The significantly higher nominal GDP was mainly due to preliminary data for the third quarter of this year. For 2025, we projected GDP at current prices of 115 429 EUR million and, accordingly, growth of 10.2%, corresponding to real growth of 3.2% and a deflator of 6.8. Harmonized inflation is 3.5% on average for the year and 3.6% at the end of the period. Consumption grew by 13.7% and was the main driver of growth. Investments amounted to 25 021 EUR million (a 16.9% increase), accounting for 21.7% of GDP. Our assessment was based on higher capital formation in the second half of the year, particularly in construction, and better absorption of EU funds, partly from the RRF. The role of the public sector was essential for the realization of these expectations.
Data from the National Statistical Institute (NSI) confirm the FC forecast. GDP at current prices amounted to 116 018 EUR million, representing 10.7% growth, corresponding to real growth of 3.1% and a deflator of 7.4. Harmonized inflation was 3.5% on an annual average and 3.5% at the end of the period. Consumption was exactly in line with the forecast, growing by 14.0% and serving as the main driver of growth. Investments were even higher at 25 195 EUR million (a 17.7% increase), accounting for 21.7% of GDP.
Exports amounted to 58 866 EUR million, representing a decrease of -0.3% due to the indirect effect of the tariffs imposed on Bulgaria (a smaller decrease than we had expected). Imports grew by 6.5%, resulting in a trade deficit of –1 203 EUR million.
Table 1. GDP for 2025 – Actual data
| 2025 | BGN million | EUR million |
| GDP market prices Total | 226 912 | 116 018 |
| GDP market prices growth | 10,7% | 10,7% |
| GDP real growth | 3,1% | 3,1% |
| Deflator | 7,4 | 7,4 |
| HICP annual average | 3,5% | 3,5% |
| Consumption Total | 179 988 | 92 027 |
| Consumption growth | 14,0% | 14,0% |
| Investment Total | 49 277 | 25 195 |
| Investment share GDP | 21,7% | 21,7% |
| Export | 115 132 | 58 866 |
| Import | 117 485 | 60 069 |
| Balance Total | -2 354 | -1 203 |
*Data from NSI
Significant risks are emerging for 2026 because of the instability of the geopolitical and domestic political situation at the international, regional, and local levels. Therefore, it is justified to prepare and present more than one scenario for economic development.
In this regard, the Fiscal Council has developed three forecast scenarios for 2026 — realistic, pessimistic, and highly pessimistic.
The baseline is the realistic scenario with a 60% probability, while the pessimistic and highly pessimistic scenarios are each assigned a 20% probability. It should be noted that the Fiscal Council does not view the pessimistic and highly pessimistic scenarios as extreme, but rather as scenarios with a possibility of realization. In these two scenarios, the magnitude of the shocks is comparable to the required cyclical buffer for the budget; by comparison, the shock experienced during the economic crisis of 2009–2010 amounted to about 9% of GDP.
Realistic Scenario
It should be noted that the baseline scenario for economic development in 2026 is based on a sharp rise in energy prices due to the war in the Persian Gulf. The baseline scenario is dominated by a deterioration in the external environment, reflecting a slowdown in growth due to a classic supply shock similar to that of the 1970s. In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) announced that it was imposing a complete oil embargo against countries that had supported Israel during the 1973 Yom Kippur War. These were Canada, Japan, the Netherlands, the United Kingdom, the United States, Portugal, Rhodesia, and South Africa. In March 1974, OAPEC lifted the embargo, but the price of oil rose permanently by nearly 300%. The 1973 embargo was later referred to as the First Oil Shock. The Second Oil Shock occurred in 1979 following the Iranian Revolution.
A supply shock is an event that suddenly increases or decreases the supply of a good or service. This sudden change affects the equilibrium price of the good or service and the general price level in the economy. A supply shock can cause stagflation due to a combination of rising prices and falling output.
The slope of the demand curve determines the extent to which the price level and output respond to the shock, with more inelastic demand (and thus a steeper demand curve) leading to a greater effect on the price level and a smaller effect on GDP.
Fig. 2. Supply shock theoretical chart
A very important factor is the response of central banks. In the 1970s, they cut interest rates to support growth, thereby further accelerating inflation. But now we can expect that at least the ECB is more likely to keep interest rates unchanged in order to control rising inflation.
The realistic forecast is based on the key assumption that the military conflict in the Middle East will be relatively short-lived, lasting at most until mid-2026, after which a gradual recovery in economic activity and a normalization of oil and natural gas prices are expected.
For 2026, we forecast GDP at current prices of 126 987 EUR million and, accordingly, nominal growth of 9.5%. Real growth is 2.5% and the deflator is 6.8. Harmonized inflation is estimated at 4.2% on average for the year. Real growth reflects a significant slowdown compared to 3.1% in 2025.
The growth rate of consumption is expected to decline to 11.7% from 14.0% in 2025. A key factor will be higher inflation and limited growth in real incomes.
Investments amount to 25 548 EUR million, representing nominal growth of 1.4%, but in real terms, a decline is reported, characteristic of a supply shock. The negative real growth in investments is also explained by the introduction of additional regulatory requirements and the high base for 2025. These negative factors are putting pressure on investment activity. A decline in private investment and weaker growth in inventories are projected. Plans and the rate of project implementation under the Public Investment Program remain highly variable at this time.
We also expect a significant negative balance of -1 355 EUR million due to higher import growth relative to export growth — a normal reaction to rising fuel prices.
Table 3. Fiscal Council Forecast: Realistic Scenario 2026
| Realistic Scenario 2026 | BGN million | EUR million |
| GDP market prices Total | 248 364 | 126 987 |
| GDP market prices growth | 9,5% | 9,5% |
| GDP real growth | 2,5% | 2,5% |
| Deflator | 6,8 | 6,8 |
| HICP annual average | 4,2% | 4,2% |
| Consumption Total | 201 047 | 102 794 |
| Consumption growth | 11,70% | 11,70% |
| Investment Total | 49 967 | 25 548 |
| Investment share GDP | 20,1% | 20,1% |
| Export | 118 125 | 60 396 |
| Import | 120 775 | 61 751 |
| Balance Total | -2 650 | -1 355 |
*The forecast calculations are provided by the FC
Pessimistic Scenario
This scenario assumes that the disruptions in international trade resulting from the military conflict will continue beyond the second quarter of the year. Disruptions in the supply of these raw materials persist until the third quarter of 2026, after which a relatively rapid recovery in trade flows is observed.
For 2026, we forecast GDP at current prices of 126 659 EUR million and, accordingly, growth of 10.3%. Real growth is 1.9% and the deflator is 7.2. Harmonized inflation is 4.6% on an annual average.
According to the forecast, consumption is growing by 11.6%. Investments amount to 25 372 EUR million.
Exports rise to 60 338 EUR million (+2.5%), and imports to 61 751 EUR million (+2.8%), resulting in a larger trade deficit of -1 414 EUR million.
Table 4. Fiscal Council Forecast: Pessimistic Scenario 2026
| Pessimistic Scenario 2026 | BGN million | EUR million |
| GDP market prices Total | 247 724 | 126 659 |
| GDP market prices growth | 9,2% | 9,2% |
| GDP real growth | 1,9% | 1,9% |
| Deflator | 7,2 | 7,2 |
| HICP annual average | 4,6% | 4,6% |
| Consumption Total | 200 867 | 102 702 |
| Consumption growth | 11,60% | 11,60% |
| Investment Total | 49 622 | 25 372 |
| Investment share GDP | 20,0% | 20,0% |
| Export | 118 010 | 60 338 |
| Import | 120 775 | 61 751 |
| Balance Total | -2 765 | -1 414 |
*The forecast calculations are provided by the FC
Highly Pessimistic Scenario
This scenario is plausible under the assumption of a more severe and prolonged shock to the supply of energy resources, including the interruption of approximately 60% of the flows through the Strait of Hormuz. In addition to logistical difficulties, direct damage to the energy infrastructure of energy-exporting countries in the Middle East is also anticipated as a result of military operations, which significantly prolongs the recovery period for the supply of these goods. Volumes begin to normalize only in the first quarter of 2027 and do so gradually. Consequently, uncertainty in international financial markets is more pronounced and prolonged, which further exacerbates the negative economic effects. The assumptions underlying this scenario are that our leading trading partners will experience continued and worsening stagnation, accompanied by fiscal crises, a downward revision of private investment plans, and the disbursement of minimal tranches under the RRF.
For 2026, we forecast GDP at current prices of 125 301 EUR million and, accordingly, growth of 8%. Real growth is 0.5% and the deflator is 7.5. Harmonized inflation is 5.0% on an annual average.
Consumption is growing by 11.3%. Investments amount to 24 691 EUR million, reflecting a nominal decline with no growth in private investment and minimal absorption of EU funds.
Exports grow by only 1%, imports grow by 2%, so the balance is strongly negative.
Table 5. Fiscal Council Forecast: Highly Pessimistic Scenario 2026
| Highly Pessimistic Scenario 2026 | BGN million | EUR million |
| GDP market prices Total | 245 067 | 125 301 |
| GDP market prices growth | 8,0% | 8,0% |
| GDP real growth | 0,5% | 0,5% |
| Deflator | 7,5 | 7,5 |
| HICP annual average | 5,0% | 5,0% |
| Consumption Total | 200 327 | 102 426 |
| Consumption growth | 11,30% | 11,30% |
| Investment Total | 48 292 | 24 691 |
| Investment share GDP | 19,7% | 19,7% |
| Export | 116 283 | 59 455 |
| Import | 119 835 | 61 271 |
| Balance Total | -3 552 | -1 816 |
*The forecast calculations are provided by the FC
Commentary on the MF Forecasts and a Comparison of the Fiscal Council’s Forecasts with Those of the BNB
The MF realistic scenario is close to the FC scenario, with only a minor difference, namely a relatively lower deflator value (5.2 according to the MF and 6.8 according to the FC). Consequently, nominal GDP according to the FC is higher than that of the MF (125 247 EUR million according to the MF and 126 987 EUR million according to the FC). We believe that the expected higher inflation also leads to a higher deflator. It should be noted that in the years 2021–2025, the deflator fluctuates between 7 and 15, and the higher values are more plausible. Due to the impact of imported prices, there is a possibility that even in the baseline scenario, the deflator could be significantly higher than 6.8. In the pessimistic scenario, the FC anticipates greater demand elasticity than the MF, and consequently, real growth and inflation are lower.
According to Article 6, paragraph 1, item 2 of the Fiscal Council Act, the Fiscal Council approves (validates) the macroeconomic forecast of the Ministry of Finance.
When comparing the forecasts, we find that the Fiscal Council is more conservative than the BNB. This is due to the uncertain situation, in which it is advisable to exercise greater caution.
Table 6. Comparison of 2026 forecasts
| Scenarios | 2026 | FC | BNB | MF |
| Realistic | GDP real growth | 2,5 | 3,0 | 2,6 |
| HICP annual avg. | 4,2 | 3,7 | 4,3 | |
| Pessimistic | GDP real growth | 1,9 | 2,7 | 2,4 |
| HICP annual avg. | 4,6 | 4,4 | 5,3 | |
| Highly Pessimistic | GDP real growth | 0,5 | 2,4 | - |
| HICP annual avg. | 5,0 | 4,9 | - |
FC Medium-Term Forecast
The FC medium-term forecast is entirely conditional and subject to change in the event of changes in the underlying assumptions due to the highly volatile external environment.
Table 7. FC medium-term forecasts 2026-28
| FC Scenarios | Indicators | 2026 | 2027 | 2028 |
| Realistic | GDP real growth | 2,5 | 2,6 | 2,8 |
| HICP annual avg. | 4,2 | 3,7 | 2,4 | |
| Pessimistic | GDP real growth | 1,9 | 2,2 | 2,5 |
| HICP annual avg. | 4,6 | 3,9 | 2,3 | |
| Highly Pessimistic | GDP real growth | 0,5 | 1,7 | 2,2 |
| HICP annual avg. | 5,0 | 4,4 | 3,6 |
Macroeconomic Forecasts of the Fiscal Council for 2026 - pdf file