World Bank senior economist Desislava Nikolova told the "Future of Money" forum in Sofia that the main barriers to Bulgaria's long-term growth lie increasingly in the economy itself: low productivity and too little investment. The forum, organised by Manager magazine, was held at the Capital Fort business complex.
The World Bank expects Bulgaria's economy to grow 2.6% this year and next, while the budget deficit will hit 5.3% of GDP this year. The forecast was made in the summer, and Nikolova said the growth figure may turn out to be a bit too high.
Bulgarians are getting richer, she said, but the country is still falling behind wealthier states like Romania in GDP per person. Besides the quality of the workforce, the biggest obstacle to growth is low investment: Bulgaria lags behind the EU average, and even behind North Macedonia and Serbia.
Domestic demand remains the main engine of growth, driven by fast-rising wages, higher government spending and mortgage lending. Nikolova pointed to signs of overheating: the economy is growing faster than its potential allows, real wages are jumping, spending is outpacing GDP growth, and the budget position is worsening.
Inflation in services is running higher than the economy-wide average — another sign of overheating, Nikolova said. Average annual inflation in Bulgaria is expected to top 4% this year, and both inflation and pressure from abroad remain high. The current account deficit stood at nearly 6% of GDP last year, and the World Bank expects a similar figure this year.
The excessive-deficit procedure will force big budget cuts over the next year or two, which will hold back growth further, Nikolova warned.
Across Europe and Central Asia — the region where the World Bank places Bulgaria — the biggest problem is a shortage of jobs. Workers brought into Bulgaria usually come from other countries in the region, where the shortage of labour is also getting worse, a bad sign for the future. Nikolova pointed to AI and automation as a possible answer to the region's problem.