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Bulgaria Outlook 2026

 Global macroeconomic and geopolitical challenges weighed on the Bulgarian economy over the past year, primarily through weaker external trade dynamics. Despite this, economic growth remained solid. Real GDP expanded by 2.8% in Q1, 3.5% in Q2, and 3.0% in Q3, supported almost entirely by strong domestic demand. Several factors underpinned this robust consumption growth with the most important being the growth of compensation and the euro transition effect.
 For 2026 the projections by major institutions yield an average number of 2.8%, driven largely by continued growth in private consumption, boosted by real income increases, even though at slower pace, the acceleration of the EU funds absorption and the improved business confidence with the euro adoption. The main external downside risk stems from the prolonged stagnation among the key trading partners and the US tariffs on EU exports, while internally the political instability and the widespread populism pose significant challenges to the long-term outlook for economic growth and public finances.
 The banking sector is on track to deliver a fourth consecutive year of profit growth. Net income for the first 11 months of 2025 reached BGN 3.4bn, reflecting a 3.6% YoY increase. The trailing 12-month return on equity moderated to 15.2% at the end of November, down from 17.3% at the end of 2024. We continue to expect that further interest rate increases are unlikely in the near term, supported by solid asset quality, strong capitalization, and high system liquidity, which is set to improve further following the reduction of minimum required reserves associated with Bulgaria’s entry into the Eurozone.
 2025 was one of the strongest years in the history of the Bulgarian Stock Exchange, with the blue-chip SOFIX index rising by 29.5% YoY. This brought cumulative three-year index growth to 92.3%. The year was broadly positive across the market, with the majority of listed shares delivering gains. At the same time, the average annual return of our investment picks reached 43.6%, comfortably outperforming the SOFIX index’s gain.
 The blue chip index skyrocketed approx. 20% in the first three weeks of 2026, making the global headlines for the best performer since the beginning of the year. The rally is backed by solid fundamentals of the businesses in question. We believe that for main blue-chips, the underlying business performance will continue to be solid in 2026. This is a good foundation for higher stock prices, which could be fuelled further by the self-fulfilling prophecy of the “euro effect”. Our value-oriented investment strategy comprises 8 stocks with the highest potential to outperform the market across a range of economic scenarios.