How will the economy and real estate market in Bulgaria change in 2023?

What to expect from Bulgaria in 2023?

The question of the sustainability of the Bulgarian economy in the face of global challenges and the prospects for the real estate market in the next two years is becoming particularly relevant. The European Union has already presented its macroeconomic estimates for this country, and at first glance 2023 may be quite challenging.

Economic forecasts and challenges

It is expected that 2023 will be a challenging year due to a number of negative factors affecting Bulgaria's economic growth. Special attention should be paid to:

• Rising prices, including the cost of energy resources;
• A slowdown in export volumes caused by a decrease in demand for Bulgarian products;
• High inflation seen in 2022.

Nevertheless, experts believe that with a certain stabilization of market conditions, a decrease in inflation will be observed, which could lead to an improvement in the economic climate.

Inflation and Gross Domestic Product

Inflationis expected to peak and not increase further as the effects of the sharp rise in energy and commodity prices gradually subside. In this regard, gross domestic product (GDP) growth is projected to increase from 1.1% in 2023 to 2.4% in 2024.

Additionally, it is noted that the government deficit is expected to decrease to 3.4% of GDP this year, which is related to the fact that measures to support the economy aimed at mitigating the effects of rising energy prices will be partially offset by an increase in tax revenues. In the future, the deficit is expected to reduce to 2.8% in 2024.

GDP growth rates

General forecasts indicate a decrease in GDP growth rates from 3.1% in 2022 to 1.1% in 2023, which is associated with a decline in both domestic and external demand. A recovery is expected to 2.4% in 2024, when the international economic situation becomes more optimistic.

Situation on the labor market

The situation in the labor market remains tense: the seasonally adjusted unemployment rate was 4.6% in August 2022. At the beginning of the year, there was a noticeable increase in nominal wages, especially in public institutions and the service sector.

Manufacturers in the processing industry have managed to adapt to rising wages by maintaining stable employment levels through increased production activity. However, the rise in wages in the service sector has led to an increase in labor costs.

Salary forecasts

Nevertheless, the expected slowdown in both domestic and external demand may hinder the hiring process and stop further wage increases. It is forecasted that the average salary will grow by 9% in 2023 and by 6.7% in 2024.

Inflation in the future

Regarding inflation, it is expected to decrease from 12.8% in 2022 to 7.4% in 2023, after which it should stabilize at around 3.2% in 2024. In the labor market, it is observed that rising service costs may increase inflationary pressure until the end of 2022, after which a gradual decline in prices is expected in 2023 and 2024.

Inflation forecasts for food products

In the coming months, there is likely to be a trend of slowing inflation in food prices, which will have a significant impact on price changes in the catering sector. According to forecasts, the second half of next year will be a period when inflation rates in the energy sector may significantly decrease, possibly even reaching negative values, which is expected to continue into 2024.

Measures to reduce energy resource prices

The measures taken to reduce the impact of high energy resource prices will have a positive effect on the budget, increasing it by approximately 2% of the gross domestic product (GDP) in 2022.

• Part of the funding for these measures will be provided through a tax on the unexpected profits of energy companies.
• This tax will be in demand from the energy sector safety fund.
• It is expected that such initiatives may continue in 2023.

Support during the pandemic

Total support expenditures during the pandemic are expected to be less than 1% of GDP in 2022, and this process should be completed by 2023. However, changes to the pension system made in 2021 and 2022, along with measures to assist citizens affected by the conflict in Ukraine, will continue to exert significant pressure on budgetary resources.

Government investments and budget for 2023

In addition, it is expected that government spending will increase due to additional funding from the European Union.

The future of Bulgaria in 2023

Concluding the discussion on Bulgaria's future in 2023, it can be confidently stated that the country is facing tough challenges, but there are also elements of a hopeful outlook. The economic situation will be influenced by a multitude of factors: frominflationandenergy carrier pricesBefore the changes in the domestic and foreign markets. It is expected that inflation, which has reached its peak, will begin to gradually decline, potentially providing a boost for economic growth in 2024.

Economic forecast

The low GDP growth rate in 2023, projected at just 1.1%, highlights the need for measures to stimulate the economy. At the same time, positive changes in forecasts for 2024 create room for hope. It is important to note that the labor market and wage levels are also under pressure; however, incomes are expected to continue rising, which should support consumer demand.

Real estate market

When it comes to the real estate market, it is showing a slowdown in price growth, just like the economy as a whole. This time of uncertainty has created caution among investors, which may affect long-term strategies in this area. However, considering the historical dynamics and the appeal of Bulgaria as a place to live and invest, it is expected that the real estate market will find its balance and resume growth after stabilization.

Key points

• The economy of Bulgariawill face challenges in 2023.
• The projected GDP growth will be1.1%.
• It is expected thatinflationwill start to decrease.
• The labor market is under pressure, but wage levels will rise.
• Real estate marketis in a state of stabilization.

Conclusion

Thus, 2023 can be seen as a transitional period for Bulgaria. Despite the challenges we may face, the confidence in future improvements, especially in 2024, inspires hope for both residents and investors. A flexible approach to addressing economic challenges and adapting to new conditions at both domestic and international levels will be key. We must be ready for changes and actively participate in the future of our country.