Bulgaria’s accession to the eurozone exposes the country to potential price pressures, where rapid income growth and inflation expectations can mutually reinforce one another. Neutralizing this risk requires the maintenance of strict fiscal discipline and short-term anti-inflationary measures, along with long-term efforts to resolve key structural imbalances in the Bulgarian economy, such as the gap between wage and productivity growth, the presence of oligopolistic and monopolistic market structures, the size of the shadow economy, and others. The foundation for such policies lies in a better understanding of the underlying factors and in greater transparency in how inflation forecasts are prepared in Bulgaria.

This qualitative and quantitative analysis explores the risk that the official inflation forecasts for Bulgaria in 2025 (averaging 3.65%) may be understated compared to actual price developments.