The correct response today is not overreaction, but consistency - in macroeconomic policy, in fiscal decisions, in the institutional direction and in long-term efforts to improve productivity and competitiveness. This was said by the Governor of the Bulgarian National Bank (BNB) Dimitar Radev at a business breakfast "Economic Prospects for Bulgaria in 2026", organized by the American Chamber of Commerce in Bulgaria. The meeting was also attended by Acting Minister of Finance Georgi Klisurski.
If we remain disciplined in these areas, Bulgaria will be in a good position not only to absorb the current shock, but also to emerge from it stronger, more competitive and better prepared for the next stage of growth, said the BNB Governor.
Radev commented that the upcoming period is likely to remain difficult - external shocks will not disappear, volatility in energy markets will continue, geopolitical uncertainty will continue to shape the environment. He noted that the economic effect of shocks is never determined only from the outside, but also depends on what we do at home - on the quality of institutions, on the discipline of policy and on the ability of companies to adapt.
In periods of increased uncertainty, the quality of domestic policy becomes even more important, Radev said, noting that the more unstable the external environment becomes, the more predictable the internal one must be. According to him, this is especially true for Bulgaria, which is a small and open economy and this is one of the drivers of our growth and convergence. However, he explained that this also means that we are more exposed to weakening external demand, trade shocks and imported price shocks. Since Bulgaria remains one of the more energy-intensive economies in Europe, energy shocks affect us more directly - through production costs, inflation and competitiveness, he pointed out.
Therefore, according to Radev, in this environment, policy should focus on three priorities. The first is for fiscal policy to remain disciplined, Radev said, explaining that it should preserve buffers, not weaken them further. This is even more important today, precisely because some of these buffers have already been used in recent years, he said. According to him, this means the need for a reliable medium-term fiscal framework and avoiding measures that bring short-term relief but create longer-term instability. When support is needed, it should be targeted, temporary and effective, Radev pointed out.
The lesson of recent years is not that fiscal policy should be passive. The lesson is that it should be better targeted, the BNB governor said. In his words, broad-based measures often seem politically attractive, but economically they can be costly and sometimes counterproductive, especially when they support demand in a way that increases inflationary pressures. The question is not whether the state should act, but whether it acts in a way that protects stability, instead of gradually undermining it, Radev added. He added that predictability is important for business, because a stable macroeconomic environment is not just a goal of public finances, it is part of the investment climate.
Dimitar Radev noted the importance of improving the business environment, adding that it is part of economic policy. When costs rise and margins are under pressure, obstacles in the business environment become even more costly. Therefore, improving the business environment is not a secondary reform - it is part of the macroeconomic response, said Radev. Reducing the administrative burden, improving institutional efficiency, strengthening the rule of law and increasing the predictability of regulations have a direct economic effect. They reduce the costs of doing business, improve planning and support investments, the BNB governor also said. He added that this is important for local companies and international investors, because in his words, in a world where capital is becoming increasingly selective, the quality of institutions is not a secondary issue - it is part of investment attractiveness.
In the long term, sustainability cannot be built primarily through compensation. It must be built through adaptation, said Dimitar Radev. He explained that this means better infrastructure, more digitalization, more innovation, higher efficiency and stronger productivity growth.
One of the clearest examples of how strategic policy choices can enhance both short-term trust and long-term sustainability is Bulgaria's accession to the eurozone, Radev also said. He pointed out that our membership in the eurozone does not replace the need to pursue national policy, but strengthens the framework in which this policy operates. It increases trust, reduces uncertainty, supports investor confidence and deepens financial integration, Radev said.
For the financial system, the benefits are just as important, and for the private sector this translates into something very practical - a more predictable environment in which long-term decisions can be made with greater confidence, said Dimitar Radev, adding that in a world like today, predictability itself becomes a competitive advantage.