BNB: Middle East conflict poses a risk of higher inflation in Bulgaria

The Bulgarian National Bank warns that the conflict in the Middle East carries a risk of higher inflation in Bulgaria.

According to the central bank’s baseline macroeconomic scenario, inflation in the country is expected to reach 3.7% in 2026, after which it will slow to 3.2% in 2027 and 2028.

At the same time, due to the high level of uncertainty, BNB has outlined alternative scenarios.

Under a moderately adverse scenario, inflation could be higher by 0.7 percentage points in 2026, 1.4 percentage points in 2027, and 0.6 percentage points in 2028.

In a more severe scenario, inflation could increase by 1.2 percentage points in 2026, 3.4 percentage points in 2027, and 2.3 percentage points in 2028.

The Central bank notes that these developments would reflect stronger secondary effects of rising prices.

According to BNB, the future path of inflation will depend largely on the duration and intensity of the conflict, as well as on how quickly higher energy prices are transmitted to the overall price level in the country.