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2.7% of GDP in 2022. The current account surplus should rise to 2.4%
of GDP in 2024.

The International Monetary Fund (IMF) has the more pessimistic
expectation that Bulgaria will post a current account deficit of 1.4% of
GDP in 2023 versus an expected deficit of 0.9% of GDP for 2022. The
deficit should fall to 0.1% of GDP in 2024.

According to the latest available central bank data, Bulgaria’s current
account posted a surplus of €770.2mn (1% of GDP) in the first nine
months of 2022, compared with a surplus of €503.6mn reported a year
earlier.

At the same time, Bulgaria’s foreign trade deficit jumped 98.4% y/y in
the first nine months of 2022 to BGN9.87bn (€5.05bn) as trade has
been recovering strongly after the restrictions imposed due to the
coronavirus pandemic. The Russian war in Ukraine did not affect
foreign trade in 2022.

On the other hand, the central bank noted that the external demand
from Bulgaria’s foreign trade partners increased more than expected in
the first half of 2022 despite the war, but the indications of deteriorating
external economic indicators at the end of the year and in the beginning
of 2023 are increasing.

2.3.3 Inflation and monetary policy

Bulgaria’s inflation skyrocketed over most of 2022 due the economic
effects of the Russian war in Ukraine. According to the latest available
statistics office data, the consumer price index (CPI) increased by
17.6% y/y in October, after rising by 18.7% y/y in September, slowing
for the first time in nearly two years but still remaining at the highest
level since July 2008.

The Harmonised Index of Consumer Prices (HICP) increased 14.8% y/y
in October, after rising 15.6% y/y in September.

According to the European Commission, the annual HICP inflation is
expected to slow down to 7.4% in 2023 from a projected 12.8% in
2022. In 2024, it should slow down to 3.2%.

The International Monetary Fund (IMF) projects that the CPI will rise by
just 2.3% in 2023 from an estimated 12.7% in 2022.

Rating agency Standard & Poor’s (S&P) has noted that Bulgaria might
not be able to meet the inflation convergence criterion in 2023 in order
to enter the eurozone in 2024. Fellow rating agency Fitch said that,
given high uncertainty about the inflation trajectory over the next two
years, the risks of a delay in euro adoption beyond 2025 have
increased.

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