The Belgian banking group KBC has revised its inflation expectations for Bulgaria — its average annual growth for 2026 is now projected at 5 percent, up from the 4.7 percent stated in August. The assessment for 2027 has also been adjusted upward by 0.3 percentage points, reaching 3.8 percent compared to the previous 3.5 percent. At the same time, the bank has not touched its economic growth forecasts — 2.6 percent for this year and 2.4 percent for next year. These data are part of the group's September economic outlook.
The quarterly growth of the Bulgarian economy stands at 0.7 percent. This meets specialists' expectations and serves as the basis for their 2026 forecast. The slowdown for 2027 was already factored in back in August and remains unchanged.
The reason for the more conservative inflation expectations is higher fuel and transport service prices. The report indicates that annual inflation in the country rose to 5.1 percent in August, while food price dynamics remain relatively favorable for consumers.
KBC specialists expect inflationary pressure to ease in 2027 as the latest price shocks subside. However, the drought introduces additional risks to this picture. According to analysts, it has forced a reduction in the capacity of the Kozloduy NPP by about 120 megawatts, which in turn has put pressure on electricity prices in the region.
In its earlier August forecast, KBC pointed to the adoption of the euro and a stronger influx of foreign direct investment as factors supporting the growth of the Bulgarian economy. Experts also noted supply-side issues. In July, 33.3 percent of industrial enterprises in the country cited labor shortages as an obstacle to their operations. Data also shows that hourly labor costs increased by 13.4 percent in the first quarter compared to the same period last year.
Poland remains the country with the highest expected growth in Central and Eastern Europe — 3.2 percent in 2026 and 3.4 percent in 2027. In the second quarter, the Polish economy grew by 1 percent on a quarterly basis. The main drivers were investments and a positive contribution from net exports.
However, Poland's public finances remain a challenge for the authorities. Poland's draft budget for 2027 anticipates a deficit of 7.1 percent of GDP — the same level as for 2026. KBC expects average annual inflation there to slow from 3.3 percent this year to 3 percent next year. Key interest rates will remain unchanged in the coming quarters. However, the bank does not rule out further monetary policy tightening if energy prices remain persistently high.
For Hungary, the forecast predicts growth of 1.8 percent in 2026 and 2.4 percent in 2027. Investment in the country remains weak — in the second quarter, its volume fell by 7 percent compared to the same period last year. The influx of European funds, as well as improving business confidence, could support the recovery of the Hungarian economy, but a more tangible effect from these factors is not expected until 2027-2028.
After the Hungarian National Bank lowered its base rate to 5.5 percent in August, KBC analysts expect it to remain at this level until the end of the year. According to their base scenario, the rate could be lowered to around 4.5 percent in 2027.
Romania is the only economy among those analyzed in the region for which KBC forecasts a contraction in 2026 — by 0.2 percent. For 2027, a recovery with growth of 2.2 percent is expected. Average annual inflation in the country is projected at 8.1 percent this year and 4.1 percent next year.
The ongoing political crisis, weak domestic demand, and the drought are narrowing the prospects for the Romanian economy, the analysis states. The delay in reforms under the National Recovery and Resilience Plan threatens European funding amounting to approximately 770 million euros, according to KBC. Furthermore, the low level of the Danube River is hindering shipping and grain exports, while also creating problems for energy production in the country.
For Slovakia, the forecast predicts growth of 0.7 percent in 2026 and 1.2 percent in 2027. Although GDP grew by 0.2 percent in the second quarter compared to the previous one, analysts expect stagnation in the third quarter due to weakening economic confidence in the country.
Measured via the Harmonized Index of Consumer Prices, average annual inflation in Slovakia is expected to reach 4.1 percent in 2026 and 3.6 percent in 2027. The drought and rising energy costs remain risks to the economy, while the need for budget consolidation limits the possibilities for fiscal support.
For the Czech Republic, KBC maintains its growth forecast of 1.9 percent in 2026, to be followed by a gradual acceleration toward an estimated potential rate of 2 to 2.5 percent in 2027. Consumption and investment are providing main support to the Czech economy, while foreign trade and inventories have a negative contribution to the result.
Inflation in the Czech Republic accelerated to 1.9 percent in August compared to 1.7 percent in July. However, the slowing of service price increases and more moderate wage growth are easing the pressure on the country's central bank.
On a global scale, the main risk identified by KBC remains the continuation and potential expansion of the conflict in the Middle East. As of September 14, natural gas prices have risen to 83 euros per megawatt-hour, compared to 43 euros at the end of June, while oil has reached 107 dollars per barrel from 73 dollars earlier. The analysts' base scenario assumes a gradual normalization of energy prices, but a more prolonged conflict would worsen the prospects for the global economy.
KBC raised its growth forecast for the eurozone in 2026 from 0.7 to 0.9 percent, after second-quarter data were revised upward. For 2027, however, expectations have been lowered — from 1.1 to 0.9 percent. The inflation forecast for the eurozone has been increased from 2.8 to 3 percent this year and from 1.8 to 2.1 percent next year.
For the United States, the expected growth in 2026 has been raised from 2 to 2.1 percent, while the forecast for 2027 remains unchanged at 2 percent. Inflation estimates for the country have been increased by 0.1 percentage points each, now standing at 3.4 percent for this year and 2.6 percent for next year.
For China, KBC maintains its growth forecasts of 4.5 percent in 2026 and 4.2 percent in 2027. According to analysts, strong exports continue to compensate for weak domestic demand in the country.
The bank's specialists expect two more interest rate hikes from the European Central Bank, as well as at least one additional 25-basis-point increase from the US Federal Reserve by the end of 2026. More persistent inflationary pressure, KBC notes, could necessitate even stronger monetary policy tightening by central banks.