Bulgaria: GDP growth accelerates in Q4
Economy ends 2024 on a high note: The economy sped up in the fourth quarter, with GDP expanding 3.1% on an annual basis, according to a preliminary estimate (Q3: +2.4% yoy), marking the best result since Q3 2022. On a seasonally adjusted quarter-on-quarter basis, economic growth picked up to 0.8% in Q4, from the previous quarter’s 0.6% increase, marking the best result since Q1 2022. In 2024 as a whole, GDP grew 3.1%, up from 2023’s 1.7%.
Domestic demand fuels improvement: Preliminary data suggests Q4’s improvement in annual GDP growth was due to the domestic sector: Final consumption expanded 5.8% year on year in Q4 (Q3: +4.8% yoy), and fixed investment rebounded, rising 0.7% in annual terms (Q3: -0.9% yoy). On the external front, exports of goods and services fell at a sharper rate of 3.2% annually (Q3: -0.6% yoy), and imports lost steam, growing 1.2% (Q3: +3.0% yoy).
Economy to shift into higher gear in 2025: Our Consensus is for GDP growth in 2025 to exceed 2024’s level, chiefly boosted by rebounds in fixed investment and exports. Looser monetary conditions, increased political stability, the increased uptake of EU funds and stronger momentum in the EU should add tailwinds. Meanwhile, private spending is set to lose steam as inflation accelerates and real wage growth melts. Key downside risks to the outlook include weaker-than-expected absorption of EU funds and a brewing trade war between Europe and the U.S. undermining export demand.
Panelist insight: EIU analysts said:
“After slowing in 2024 amid low take-up of EU funds, we expect gross fixed investment growth to pick up in 2025. The appointment of a new government in January 2025 following ten months of interim government should increase the take-up of EU funds, supporting public investment. […] Investor sentiment is set to improve, driven by Bulgaria’s full entry into the Schengen area in January 2025, and the likely adoption of the euro by 2026. Schengen area membership should also help to boost merchandise trade flows, given the importance of road freight for Bulgaria’s trade with the EU.”