What does Bulgaria expect in 2023? How stable will be the economy of this country against all the world shocks and what to expect from the real estate market in the next two years? The European Union has prepared a macroeconomic forecast for Bulgaria, and it looks like 2023 will not be an easy year. 

Macroeconomic outlook

The year 2023 is expected to be difficult for Bulgaria from an economic point of view, but the positive outlook for 2024 is encouraging.

So, Bulgaria’s economic growth will be negatively affected by several factors at once: higher prices (including for energy), a slowdown in export growth (due to lower demand for goods from other countries), and high inflation, which was observed in 2022. Inflation is expected to reach its peak and will not rise further, because the effects of higher energy and food prices are gradually decreasing. With inflation gradually slowing, GDP growth is projected to accelerate from 1.1% in 2023 to 2.4% in 2024. The government deficit is projected to shrink to 3.4% of GDP in 2022 (as a large amount of energy price mitigation is balanced by higher income) and fall to 2.8% in 2023.

Overall, GDP growth is projected to slow from 3.1% in 2022 to 1.1% in 2023 due to lower domestic and external demand, and then rise to 2.4% in 2024 as external conditions improve.

The labor market remained tight, with seasonally adjusted unemployment at 4.6% in August 2022. Nominal wages rose strongly earlier last year, including public sector and service sector wages. Manufacturers were able to cope with strong wage increases, keeping employment virtually unchanged as manufacturing activity intensified. In contrast, high wages in the service sector led to higher labor costs. However, the expected slowdown in both domestic and external demand should put hiring decisions on hold and restrain further rapid wage increases. Wages are expected to rise 9 percent in 2023 and 6.7 percent in 2024.

Inflation should decline from 12.8% in 2022 to 7.4% in 2023 and then settle at 3.2% in 2024. Labor market dynamics suggest that cost pressures on services will likely lead to further acceleration in price increases through the end of 2022 and a gradual decline through 2023 and 2024. Food price inflation is expected to slow gradually and will be an important factor in the price dynamics of the food service sector. Energy price inflation is expected to slow and turn negative in the second half of next year and then remain negative in 2024.

Measures to mitigate the effects of high energy prices are expected to have a 2% net fiscal impact in 2022, as they are partially financed by a tax imposed on windfall profits of the energy sector and collected by the Electricity System Security Fund. Such measures are expected to be extended into 2023.

The total cost of pandemic support measures is expected to fall to less than 1 percent of GDP in 2022, and to phase out in 2023. At the same time, amendments to the pension system adopted in 2021 and 2022 and assistance to people from the conflict zone in Ukraine continue to put pressure on state finances. Government investment is expected to increase, mainly with EU funding.

Until the law on the 2023 budget is passed, other expenditure items will follow last year’s monthly performance. In this context, the budget deficit is projected to fall to 2.8% of GDP in 2023 and 2.5% of GDP in 2024.

Apartments by the sea are priced from €15,000 to €24,000. Cheap apartments in Bulgaria

What awaits the real estate market in Bulgaria in 2023

Back in the middle of 2022 Daria Borzova, the manager of Oasis real estate agency, recorded an increase in real estate prices in Bulgaria. At that time in the largest city of the country — Sofia — the cost per square meter of housing averaged € 1,500 in Plovdiv — about € 1,300 in Varna and Burgas — about € 1,000. If you wanted to buy a studio in a small coastal city, then do not count for less than € 15,000.

By the end of 2022, as in most European countries, property prices in Bulgaria have stopped growing — the market has more or less stabilized. High inflation and rising interest rates meant that the domestic demand for housing fell, and foreign investors took a wait-and-see attitude. Recall that at the end of October 2022, the European Central Bank raised the benchmark lending rate to 2%, the highest level since the global financial crisis. Of course, the increase in mortgage rates in all European countries has led to a slowdown in the global real estate market, and Bulgaria is no exception.

However, lower demand does not mean its absence. New buildings in Bulgaria are still in demand, especially in Nessebar, where demand for housing continues to grow. At the same time construction throughout the country is carried out on a huge scale: in the third quarter of 2022 started the construction of 8823 houses. 

As expected, houses in small towns and villages have become in high demand among the local population. Already in 2021, there are 108 thousand more residents in Bulgarian villages, and in 2022-2023, according to forecasts of the Association of Bulgarian villages, 90 thousand more people will move to the villages. The main reason for this is the possibility for many people to work remotely.

Overall positive macroeconomic forecast of the European Union in Bulgaria suggests that even if the real estate market in early 2023 will stagnate, then by the end of the year and early 2024, experts predict that demand for real estate will again grow, and then the cost per square meter of housing.