Bulgaria’s convergence towards more advanced economies has continued but at a slower pace. Soaring energy and food prices have pushed up inflation to its highest levels in decades. However, support packages and strong momentum in wages and pensions have stabilised purchasing power. With the currency board arrangement, the onus to decrease short-term inflationary pressures is on fiscal policy. Fiscal discipline has resulted in low public debt, but growing spending pressures related to ageing, infrastructure and skills will need to be financed by greater tax collection efficiency and higher environmental taxes. The fight against corruption, which imposes high transaction costs, needs to continue by implementing more effective measures. Bulgaria’s climate transition strategy is under development. Environmental taxes, including excise taxes on fuels and carbon taxes on sectors outside of the emissions trading system need to increase to curb energy intensity and reduce emissions. The shrinking number of workers due to smaller young cohorts entering the labour market and outward migration are undermining Bulgaria’s growth prospects and the sustainability of its social institutions. Bulgaria needs to provide more support for families, including quality childcare country-wide, and make staying in the country more attractive by raising productivity, fostering the creation of good-quality formal jobs and reinforcing the social safety net.

SPECIAL FEATURE: BETTER JOBS AND INCOMES