IMF Warns: Bulgaria’s Inflation Remains High, Reforms Needed!

The International Monetary Fund (IMF) reports that Bulgaria's economy has shown resilience amid recent shocks, achieving a soft landing with growth expected to slow to 1.8% this year. This improvement is attributed to renewed demand from Bulgaria's main trading partners, leading to increased exports and investments supported by EU funds.

Despite rising wages, pensions, and inflation driven by budgeted spending, the IMF predicts inflation will ease due to declining global food and energy prices. However, Bulgaria's inflation rate remains higher than in most European countries.

The IMF emphasizes the importance of reforms to support economic growth, enhance income convergence with the EU, and improve sustainability. They urge Bulgaria to adopt the euro within the expected timeframe, although the country still struggles to meet the inflation criterion for Eurozone entry.

Bulgaria faces fiscal policy challenges, needing to balance inflation reduction with maintaining prudent fiscal policy amid uncertainties and domestic fiscal risks. The IMF calls for significant fiscal reforms, including increasing tax revenues, reforming the tax system for fairness and better collection, and reducing the shadow economy. They also recommend pension system reform and improved management of state-owned enterprises to prevent debt accumulation.

The IMF echoes concerns from the Bulgarian National Bank (BNB) regarding the rapid growth in mortgage lending and advises vigilance. Additional common recommendations include boosting productivity, increasing local and foreign investment, improving competitiveness, reducing corruption, and timely implementing recovery plan measures.

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