Bulgaria’s upcoming eurozone accession is expected to lower transaction costs with its main trade and investment partners, according to the U.S. Department of State’s annual investment climate report. The report also highlights that labor shortages and persistent inflationary pressures continue to drive up prices and wages in the country, while foreign investors remain wary about the state of the rule of law.

The report notes that corruption continues to pose a challenge in Bulgaria. Public officials are legally required to submit asset declarations and disclose conflicts of interest; however, certain family members are exempted, and the law’s implementation is inconsistent. On foreign ownership, the report states that aside from some exceptions – such as restrictions on agricultural land for non-EU entities and limitations tied to national security – foreign investors generally enjoy the same rights as domestic companies.

Investor concerns outlined in the report include inconsistent regulatory and law enforcement practices, challenges in obtaining permits, frequent changes in legislation, inefficiencies in the judicial system, and difficulties in enforcing court decisions.

The report also underlines medium-term economic risks. A shrinking population combined with relatively low investment in innovation could slow economic growth. Still, Bulgaria’s economy showed improvement, with growth rising from 1.9% in 2023 to 2.8% in 2024. The government projects another 2.8% increase in 2025, supported by strong domestic consumption and public investment programs. Public sector wage costs and government spending are expected to push total expenditures above 40% of GDP. Labor costs and productivity remain lower than in other EU states, but Bulgaria is pursuing the development of a robust innovation ecosystem connecting academia, public institutions, and private and international partners.

Joining the euro area, scheduled for January 1, 2026, is expected to further facilitate trade and investment by reducing transaction costs. Additionally, accession negotiations with the OECD, launched in January 2022, are anticipated to encourage further economic reforms and strengthen Bulgaria’s business environment.