The Belgian banking group KBC has revised its inflation expectations for Bulgaria upward. According to the institution's September economic outlook, the average annual price increase in the country is expected to reach 5% next year, whereas the August forecast was 4.7%. The assessment for 2027 has also been raised by 0.3 percentage points, to 3.8% compared to the previous 3.5%. At the same time, GDP growth expectations remain unchanged at 2.6% this year and 2.4% in 2027.
The reported quarterly growth of 0.7% aligns with KBC's expectations. The forecast for 2026 is confirmed. The slowdown in 2027 had already been factored into the group's previous August assessment.
The more cautious inflation forecasts are primarily due to rising fuel and transport costs. The review indicates that annual inflation in Bulgaria accelerated to 5.1% in August, while food price dynamics remain relatively favorable. Analysts expect the inflation rate to slow down in 2027 as the effects of recent price shocks and price pressures gradually weaken. Meanwhile, the drought is creating additional risks; according to the review, it has forced a reduction in the capacity of the Kozloduy NPP by about 120 megawatts, which in turn has contributed to tension regarding regional electricity prices.
In its August forecast, KBC pointed to the adoption of the euro and the first signs of stronger inflows of foreign direct investment. These factors support the growth of the Bulgarian economy. At that time, experts also drew attention to supply-side constraints. In July, 33.3% of industrial enterprises cited labor shortages as an obstacle to their operations. Hourly labor costs increased by 13.4% in the first quarter compared to the same period last year.
Beyond Bulgaria, the KBC review also examines the prospects for other economies in Central and Eastern Europe. Poland will maintain the highest growth rate in the region—3.2% in 2026 and 3.4% in 2027. In the second quarter, the Polish economy grew by 1% compared to the previous period. Investment and a positive contribution from net exports provided key support. However, the country's public finances remain a concern. The draft budget for 2027 envisions a budget deficit of 7.1% of GDP, unchanged from 2026. KBC expects average annual inflation in Poland to slow from 3.3% this year to 3% next year, with interest rates remaining unchanged, though they do not rule out further tightening if energy prices remain persistently high.
For Hungary, the forecast predicts economic growth of 1.8% in 2026 and 2.4% in 2027. Investment in the country remains weak—in the second quarter, its volume fell by 7% on an annual basis. The influx of European funding and improving business confidence could support a recovery, but a more tangible effect is only expected in 2027-2028. Following the reduction of the base interest rate to 5.5% in August, analysts believe the Hungarian National Bank will maintain it at this level until the end of the year, and in 2027, under the base scenario, it could be lowered to around 4.5%.
Romania is the only economy among those reviewed in the region for which KBC forecasts a contraction in 2026—by 0.2%, followed by a recovery with growth of 2.2% in 2027. Average annual inflation there is expected to reach 8.1% this year and slow to 4.1% next year. The prolonged political crisis, weak domestic demand, and the consequences of the drought are limiting the prospects for the Romanian economy. According to analysts, the delay in reforms under the National Recovery and Resilience Plan jeopardizes European funding amounting to approximately 770 million euros. Furthermore, the low level of the Danube River is hindering shipping and grain exports, while also creating problems for energy production.
For Slovakia, KBC forecasts growth of 0.7% in 2026 and 1.2% in 2027. Despite a recorded quarterly GDP increase of 0.2% in the second quarter, analysts expect stagnation in the third due to weakening economic confidence. Average annual inflation in the country, measured by the Harmonized Index of Consumer Prices, is expected to be 4.1% in 2026 and 3.6% in 2027. The drought and rising energy costs remain risks for the Slovak economy, and the need for fiscal consolidation limits the possibilities for its support.
For the Czech Republic, KBC maintains its forecast for growth of 1.9% in 2026, followed by a gradual acceleration toward an estimated potential rate of 2 to 2.5% in 2027. Consumption and investment provide primary support for the economy, while foreign trade and inventories make a negative contribution. Inflation in the country accelerated to 1.9% in August from 1.7% in July, but the slowdown in service price increases and more moderate wage growth are easing pressure on the central bank.
On a global scale, the main risk according to KBC remains the continuation and potential expansion of the conflict in the Middle East. As of September 14, natural gas has risen to 83 euros per megawatt-hour from 43 euros at the end of June, while oil has reached 107 dollars per barrel compared to 73 dollars earlier. The analysts' base scenario assumes a gradual normalization of energy prices, but a more prolonged conflict would worsen economic prospects.
KBC also raised its growth forecast for the eurozone in 2026—from 0.7% to 0.9%, due to the upwardly revised second-quarter data. For 2027, however, expectations were lowered from 1.1% to 0.9%. The inflation forecast for the eurozone has been increased from 2.8% to 3% this year and from 1.8% to 2.1% next year.
For the United States, the expected growth in 2026 has been raised from 2% to 2.1%, while the forecast for 2027 remains unchanged at 2%. Inflation estimates for the country were increased by 0.1 percentage points each, to 3.4% and 2.6%, respectively. For China, KBC maintains its growth forecasts of 4.5% in 2026 and 4.2% in 2027, noting that strong exports continue to compensate for weak domestic demand in the country.
KBC analysts expect two more interest rate hikes from the European Central Bank, as well as at least one additional 25-basis-point increase from the US Federal Reserve by the end of 2026. According to them, more persistent inflationary pressure could necessitate even stronger monetary policy tightening by central banks.