В навечерието на еврото: фискална устойчивост и средносрочни перспективи пред икономическото развитие на България
On the Eve of the Euro: Fiscal Sustainability and Medium-Term Prospects for Bulgaria’s Economic Development

Author(s): Victor Yotzov
Subject(s): Economy, National Economy, Public Finances
Published by: Институт за икономически изследвания при Българска академия на науките
Summary/Abstract: This study assesses Bulgaria’s fiscal sustainability on the eve of the adoption of the euro, situating it with-in the broader medium-term prospects for economic development. The analysis combines the classical framework of public debt dynamics with a scenario-based stress test that integrates three groups of risks: (i) the structural weaknesses of the Bulgarian economy (low productivity, demographic pressures, region-al disparities), (ii) emerging climate-related and geoeconomic shocks, and (iii) the implications of the country’s definitive accession to the euro area. Methodologically, the study extends the conventional ap-proach—based on the equilibrium between the interest rate, economic growth, and primary balances—by introducing state-dependent fiscal multipliers and explicitly modelling external shocks. A dynamic model is developed for the period 2025–2035, within which five alternative scenarios are simulated: a baseline scenario; a scenario with global trade protectionism; a climate shock; a combined shock (trade plus cli-mate); and a scenario of a deteriorated global financial environment characterized by a persistently pos-itive differential between the interest rate on public debt servicing and real economic growth. The results indicate that, under the baseline scenario, Bulgaria retains its position as a low-debt country and contin-ues to comply with the Maastricht criteria, despite a gradual increase in the debt-to-GDP ratio. The most severe risks arise under a scenario of prolonged global stagnation and higher interest rates, when r–g becomes persistently positive and sufficient primary surpluses are absent; in this case, public debt moves from a “low” to a “medium” level and follows a potentially unstable trajectory. The conclusion is that Bulgaria enters the euro area with a relatively favourable fiscal position, but its sustainability depends critically on the ability to preserve the fiscal buffer, to integrate climate-related and geoeconomic risks into budgetary planning, and to accelerate real convergence through structural reforms and productivity enhancement.

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