Economists from BAS warn: Membership in the Eurozone may be postponed after 2025

Because of inflation and incomes policy, which is not sufficiently aligned with real budgetary possibilities, the annual report of the Institute for Economic Research makes clear

Industry / Bulgaria
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Inflation in Bulgaria will gradually decrease, but it will be higher than usual in the previous decade both because of external factors and as a consequence of the implemented income policy, which is not sufficiently in line with the real budgetary possibilities. In such conditions, membership of the Eurozone would be postponed even after 2025. This is stated in the regular annual report "Economic Development and Policies in Bulgaria: Estimates and Expectations" of the Institute for Economic Research (IER) at the Bulgarian Academy of Sciences (BAS). published on the institute's website.

The report analyzes the economic development of Bulgaria and the implemented economic policies. The state and development of the Bulgarian economy in 2023 is examined and estimates for economic development in the medium term until 2026 are presented.

The main sectors of the economy (real, fiscal, external and financial) are considered, taking into account the connections and dependencies between them, both domestically and internationally. This year, the special thematic focus is on energy poverty in Bulgaria and policies to limit it.

The IER's short-term forecast is for domestic demand to continue to be the main driver of economic growth, which is expected to remain below potential and gradually recover to pre-Covid average levels. The dynamics of consumption will be determined by the increase in wages, the moderate increase in employment and the low, but still positive growth of credit activity in the country. Investments will be mainly influenced by the rate of absorption of EU funds. Given the expected weak economic growth in Bulgaria's main trading partners, external demand will remain relatively low, and the balance of payments will deteriorate throughout the period 2024-2026, economists predict.

The recommendations of the authors of the report to the economic policy in the country are aimed at activating investment activity, restructuring the labor market in the conditions of a green and digital transition, conducting fiscal consolidation, developing the potential of foreign trade relations with countries outside the EU and preserving the stability of the financial sector.

The report analyzes and assesses the dimensions of energy poverty in Bulgaria during the period 2014-2023. It is indicated that Bulgaria registers one of the highest levels of energy poverty in the EU, but lags behind in introducing a mechanism to support energy-poor households and does not undertake the necessary actions for a targeted, comprehensive and coordinated intersectoral policy in this area. The scientists from the IER indicate the need to conduct an active social and investment policy towards citizens, not only with regard to current costs for transport and energy, but also for their long-term reduction through targeted investments and measures in energy efficiency and decarbonization.

The introduction of a mechanism for social affordability of electricity prices in the conditions of a liberalized market, which is combined with clearly prescribed measures and a clear scale of differentiation of support according to income criteria, is justified. It is proposed that energy poverty be assessed not per person, but at the household level, according to the number of persons in it, determining the living area for each type of household.

The energy poverty monitoring system should include annual tracking of renovated buildings and energy consumption, an adequate assessment of social risks and opportunities, the consequences for employment and skills, the impacts of the climate and energy transition in the country, BAS economists also suggest.

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