While leading European countries were stagnant last year amid geopolitical and trade tensions, high interest rates and industrial problems, the Bulgarian economy expanded by 2.8%, slightly exceeding the expectations of most institutions. This is according to preliminary data from the National Statistics Office. Despite political instability in the country and weaker external demand from our main trading partners, domestic consumption has remained the engine of economic activity thanks to increasing incomes and lower inflation.
The latest forecasts of the Ministry of Finance and the Bulgarian National Bank were for 2.2 and 2.3% real GDP growth in 2024, respectively, and in its autumn macro forecast, the European Commission was betting on 2.4% for Bulgaria. However, the growth at the end of the year turned out to be stronger than expected, at 3.4%, instead of 3.1%, which were the express estimates of the National Statistical Institute. In addition, earlier the data for the other quarters were also revised slightly upwards. The numbers reflect real changes, which means that they exclude the effect of rising prices.
The gross domestic product - i.e. the value of all goods and services produced on the territory of the country, in 2024 for the first time exceeds 200 billion levs, amounting to 202.860 billion levs. For comparison, the previous year this was just over 185 billion leva. Thus, the economy nominally grew by 9.5%, the data also show.
Weak growth in the EU in 2024
The growth of the Bulgarian economy compares well with other European countries, although it is far from being among the highest. According to the latest Eurostat data, the EU's GDP expanded by only 1% last year, and that of the eurozone by 0.9%. The leading European economy - Germany - shrank by 0.2%, while France and Italy recorded growth of 1.2% and 0.7% respectively. Austria performed the worst with a decline of 1.2%, being in minus for the second year in a row. However, Spain, Cyprus, Denmark and Croatia are ahead of Bulgaria, achieving growth of over 3%, and Malta - 6%.
Data for some EU countries have not yet been published.
Domestic consumption - driver for the economy
Over half of Bulgaria's GDP is accounted for by household consumption, which is also the main driver of growth. In real terms, the indicator increased by 4.2% compared to 2023 - the highest rate in the last few years after that in 2021, when the recovery from the pandemic and the low base from 2020 had an effect. The higher consumer spending is now likely due to the increase in income from labor and social benefits against the background of lower inflation. In 2024, the average annual consumer inflation slowed to 2.4%, while the average salary increased by nearly 14%, statistics show.
Government spending is also contributing to overall growth - government consumption is the fastest-growing component in 2024, up 6.2% year-on-year. This is also its biggest increase since 2020, when it was 9.7% due to higher government spending on measures to deal with the Covid crisis.
Investments, which are traditionally low in Bulgaria, are also rising after a year of deep decline. They are growing by 4.1% in 2024, after falling by nearly 13% the previous year. However, the catch here is that the change probably comes mostly from companies' inventories - purchases of materials and raw materials, as well as finished goods in stock. Investments in fixed capital - buildings, machinery and equipment, which are important for the long-term development of the economy, are about 1% less than the previous year, after recording a growth of over 10% in 2023. However, specific data on the change in inventories in real terms are not published by the statistics.
Net exports of goods and services are dragging down overall growth. Exports from the country decreased by 0.8%, while imports grew by 1.3%. This was expected against the backdrop of weak external demand and the economic slowdown in Bulgaria's leading trading partners in Europe, and in particular Germany, with which Bulgarian industry is strongly linked. In nominal terms - while exports of goods are shrinking from 85 billion levs to 83 billion levs, exports of services have nevertheless continued to grow steadily in recent years and already exceed 30 billion levs.
State-dominated sectors grow the most
As before, the largest share of the Bulgarian economy in terms of production falls on the services sector, which brings about three-quarters of the added value. Industry follows with about 23%, while agriculture shrinks to less than 2%. The data are as of the last quarter of 2024.
Overall, for the year in real terms, most economic activities recorded growth despite the challenging external environment. The only exception is "agriculture, forestry and fishing", which contracted by nearly 7%. The sector that includes government, education, healthcare and social care, in which the state dominates, grew the most, by 5.5%. Construction also increased by over 5%. The largest economic sector, which includes trade, transport, hotels and restaurants, grew by 3.6%, the data show. Industry and energy, which are important for the economy, increased their added value by 1.2% in total, and the technology sector - by about 3%.
The Bulgarian economy is expected to grow at a similar pace this year, with leading institutions' forecasts ranging from 2.5-2.9%, although there are also more pessimistic ones - around 2.1%. However, given the serious geopolitical challenges and trade tensions between Europe and the US, the risks facing the economy this year should not be underestimated.
While leading European countries were stagnant last year amid geopolitical and trade tensions, high interest rates and industrial problems, the Bulgarian economy expanded by 2.8%, slightly exceeding the expectations of most institutions. This is according to preliminary data from the National Statistics Office. Despite political instability in the country and weaker external demand from our main trading partners, domestic consumption has remained the engine of economic activity thanks to increasing incomes and lower inflation.
The latest forecasts of the Ministry of Finance and the Bulgarian National Bank were for 2.2 and 2.3% real GDP growth in 2024, respectively, and in its autumn macro forecast, the European Commission was betting on 2.4% for Bulgaria. However, the growth at the end of the year turned out to be stronger than expected, at 3.4%, instead of 3.1%, which were the express estimates of the National Statistical Institute. In addition, earlier the data for the other quarters were also revised slightly upwards. The numbers reflect real changes, which means that they exclude the effect of rising prices.
