The climate-fiscal timebomb: Bulgaria

08 March 2026

Fiscal outlook

Bulgaria recorded a 3% deficit and a debt-to-GDP ratio of 23.8% in 2024, the lowest in the EU. The country has been under pressure to keep fiscal discipline to join the eurozone. This has been blocking necessary public investment, with the country’s economic recovery from the effects of the Covid-19 pandemic slowing due to Russia’s invasion of Ukraine, and a delay in and loss of EU funds.

Deficit measures the level of borrowing in a given year. Debt-to-GDP compares the total public debt to the size of the economy. Both are currently used to determine how much borrowing a member state is allowed to undertake. However, neither measure in itself determines a government’s capacity to sustain higher levels of public investment. Fiscal sustainability depends on growth, the multiplier effects of investment, interest rates, inflation, the structure of the economy and external risks such as climate change. NEF advocates moving away from strict numerical debt targets.

Rising climate costs

The country is experiencing higher climate impacts, with the European Environment Agency describing it as being located in a region that is particularly vulnerable to climate change. In 2024, people in Bulgaria experienced 12 days of heatwaves, 10 of which would not have been expected to occur without climate change. In 2024, 65% more potential labour hours were lost due to heat exposure than in the 1990s. In the summer of 2025, the country faced one of the most serious water crises in its recent history, with over 260,000 people struggling to access clean water. Floods have become more frequent, with the Bulgarian authorities declaring a state of emergency in several towns in October 2025.

What NEF’s modelling shows

Organisation for Economic Co-operation and Development (OECD) projections show Bulgaria’s GDP declining by 12% by 2050 and 18% by 2070 under current policies. Our modelling shows the following:

Under current policies (BAU – business as usual), Bulgaria’s debt is 49 pps higher than the baseline in 2050 and 171 pps higher in 2070.

With early EU mitigation and sufficient adaptation spending, debt is 45 pps higher in 2050 and 72 pps in 2070.

Delayed EU investments and insufficient adaptation results in higher debt levels of 57 pps in 2050 and 97 pps in 2070.

EU early action combined with global cooperation results in 9 pps higher debt levels than the climate-agnostic baseline in 2050 and 7 pps lower levels in 2070.

Progressive taxation, such as a wealth tax, combined with EU early action would increase debt by 8 pps in 2050 and reduce debt by 3 pps in 2070 compared to the climate-agnostic baseline.