Bulgaria

Economic performance remains robust but risks to the outlook are tilted to the downside amid slowing external demand. Sound macroeconomic policies notwithstanding, Bulgaria faces a sizable income gap vis-à-vis the EU average and unfavorable demographic prospects. The main policy challenge is to raise growth potential, which calls for broad-based structural reforms to improve public goods provision and institutions. Bulgaria’s preparations for ERM II and the banking union are strengthening financial sector supervision and are generally conducive to reforms.