The New U.S. Tariffs Are Not Expected to Have a Significant Impact on the Bulgarian

The new U.S. trade tariffs are not expected to have a significant negative impact on the Bulgarian economy, and if there is any, it will be felt with a slight delay by businesses in Bulgaria. This is indicated in the spring macroeconomic review by "DSK Bank." According to the bank’s analysis, the Bulgarian economy is showing resilient growth despite uncertainty.

The effects of the new U.S. tariffs will be indirect because Bulgaria does not have major trade relations with the U.S. (only 2–3% of its total exports). Negative effects are more likely to come through Bulgaria’s key trading partners, Germany and Italy, who are among those impacted by the tariffs. The sectors expected to be affected are the automotive industry and mechanical engineering, as the U.S. tariffs mainly target industrial goods. However, the bank points out a positive side to this turbulent situation: an opportunity for the EU and Bulgaria to broaden their trade horizons geographically.

The bank highlights that Bulgaria demonstrated strong economic growth last year — one of the highest among EU member states. As a result, convergence with the EU average continues, although conditions allow for potentially faster progress. By the end of 2024, Bulgaria's economy grew by 4.1%, compared to 1.2% for the Eurozone.

Falling inflation and rising incomes largely explain the strong performance of private consumption, which is expected to continue supporting economic growth in the medium term. Public consumption's contribution to GDP growth remains neutral, but a positive correction is expected, mainly due to rising defense and security spending, according to the analysis. However, domestic political instability is preventing the full realization of long-term investment potential, the bank’s macroeconomic team notes.

Despite relatively low inflation levels, price pressures are deepening, with some negative risks materializing. The worsening international environment, combined with domestic challenges, led to a rise in inflation, which reached 4% by the end of March. Furthermore, increases in electricity, water, excise taxes, and bread prices boosted inflation earlier this year, the analysis notes. The bank’s forecast expects annual inflation (according to the national consumer price index) to reach 2.9% in 2025, 2.5% in 2026, and 2.2% in 2027.

The bank also notes that Bulgaria is becoming increasingly attractive to foreign nationals settling in the country. Data for 2023 shows that immigration fully compensated for the otherwise declining population. Nearly 60,000 people settled in Bulgaria, mainly for employment reasons.