Stoyan Panchev, economist at the Expert Club for Economics and Politics, expressed confidence that loan interest rates in Bulgaria are unlikely to rise following the country’s entry into the eurozone. Speaking to Bulgarian National Radio, Panchev noted that the eurozone itself is beginning to reduce rates, while the U.S. Federal Reserve is expected to lower interest rates sharply. “The ECB cannot maintain rates much higher than those in the United States. We can expect a further reduction in the eurozone, which will likely bring European interest rates closer to Bulgarian levels,” he explained.

At the same time, Panchev identified the rapid growth of lending in Bulgaria as a concern. He also described the ongoing explanatory campaign for the euro as “more like propaganda,” suggesting it lacks practical substance. On the topic of social indicators, he sees no reason to alter the calculation of the poverty line, warning that changing the methodology without careful consideration often creates additional problems.

Regarding the planned increase of the minimum wage to 1,213 leva, Panchev criticized the mechanism used to calculate it, which ties the minimum wage to 50% of the average wage. “This formula continually pushes the minimum wage higher, which in turn raises the average wage. This mechanism needs urgent reform, as employers are increasingly trying to circumvent the minimum wage,” he said.

Panchev also commented on Prime Minister Rosen Zhelyazkov’s recent assurances that taxes and social security contributions would not rise in the new budget. He expressed skepticism, noting the need to address the budget deficit. “While the prime minister may aim to control spending, it seems likely that taxes or contributions will eventually increase. Raising VAT could be the quickest and least painful solution, though it risks driving inflation higher,” Panchev added.

The economist highlighted that inflation was largely overlooked in 2024, as the government assumed it would remain low following the positive convergence report. “If the situation mirrors Croatia’s experience, further price increases could follow,” he warned, stressing the importance of careful financial planning as Bulgaria transitions into the eurozone.

Source: BNR interview