Bulgaria's economy will grow by 2.7% in 2026, then slow to 2.5% next year, according to a report on regional economic prospects published today by the European Bank for Reconstruction and Development (EBRD). The figures match the bank's June forecast — its estimates for both 2026 and 2027 are unchanged.

The economy grew by 3.4% in 2024 and 3.1% in 2025. In the first six months of 2026, growth already slowed to 2.8%. Household spending and investment, though, are still holding up, the EBRD says.

Industrial output is rising again after falling sharply in 2025. Services and construction also keep doing well. Exports dropped considerably in the first three months of the year but partly recovered by mid-2026.

Inflation in Bulgaria, measured by the harmonised index of consumer prices, hit 6.3% in May, driven mainly by pricier energy. By July, though, food price rises had already started to slow.

Public finances have taken a hit since the start of the year. The 2026 budget plans for a deficit of 5.7% of GDP under the consolidated fiscal programme, calculated using the EU's general government methodology, EBRD data show.

Since July, Bulgaria has been under an EU excessive deficit procedure. Cutting the budget deficit will therefore be one of the government's top economic tasks in the coming years. The EBRD says this is exactly where the main risk to growth lies: if the state has to tighten spending sharply, confidence among households and businesses could suffer.

Spending EU recovery fund money is back in focus after Bulgaria fell behind in earlier periods. Experts believe Bulgaria should manage to use up a large share of the funds allocated to it by the end of the year.

The report also says investment in Bulgaria remains steady, and that the recovery in industry, together with growth in services and construction, keeps propping up the economy.

Why southeastern Europe is growing more slowly

Growth across southeastern Europe slowed from 1.4% in 2024 to 1.2% in 2025. In the first half of this year, activity in the region barely moved. The main reason is the shrinking Romanian economy, where tight budget cuts and high inflation have hit household spending and output has fallen. The EBRD expects Romania's economy to shrink by 0.2% this year before growing by 1.8% next year. Bulgaria, by contrast, kept growth near 3% in the first half of the year.

For the whole southeastern Europe region, the EBRD expects growth of 0.5% in 2026 and 2% in 2027. Those forecasts are unchanged from June.

The risks: costly oil, costly gas, too little water

More broadly, the EBRD warns that the countries it invests in are facing pricier energy and food, drought, trade trouble and harder-to-get financing.

Oil prices jumped from around $65 a barrel before the Middle East conflict to more than $100 in April 2026, and are still running 30% to 60% above pre-conflict levels. Some refined fuels — diesel and jet fuel — have risen even more sharply, the bank says.

Gas is also under pressure: prices have risen more than 70% since February, while global seaborne exports of liquefied natural gas have dropped by 40%.

The EBRD also flags climate risks and water shortages. Low water levels on the Danube and the Rhine are already hampering shipments of industrial goods and cutting power output from both hydro and nuclear plants.

"Water shortages, extreme weather and pricier financing are piling on top of already-high energy costs and putting further pressure on growth," said EBRD chief economist Beata Javorcik.

She said this shows investment is needed so economies can better withstand future shocks.

The EBRD says the countries it works in still rely mainly on fossil fuels, with oil and natural gas covering around two-thirds of total energy use. To cut their reliance on gas, these countries will need to invest more in renewable energy, energy storage and nuclear power.

Across the European Union, high electricity prices keep weighing on industry. EU companies pay on average about 2.4 times more for electricity than firms in the US, pushing energy-heavy manufacturers to move elsewhere.