By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Dimitar Radev warned on Friday that a prolonged external shock starting in energy could spread more broadly through the economy, with implications for monetary conditions as well as for businesses.
Radev, who heads the Bulgarian National Bank, said at an AmCham business breakfast in Sofia that Bulgaria remained relatively well positioned, but that the external environment had become more difficult and required policy consistency, fiscal discipline and greater business resilience.
“When external shocks last longer, they rarely remain confined into one sector. What starts with energy can gradually spread through the wider economy,” Radev said. “That matters for monetary conditions, of course, but it also matters directly for businesses.”
He said the right response was “not overreaction, but consistency” in macroeconomic policy, fiscal decisions, institutional direction and long-term efforts to improve productivity and competitiveness.
Radev said the economic effect of external shocks was not determined only by developments abroad, but also by domestic institutions, policy discipline and the ability of firms to adapt. Bulgaria, as a small, open and relatively energy-intensive economy, was particularly exposed to weaker external demand, trade disruptions and imported price shocks, he said.
“The current period should be used wisely,” Radev said about the Bulgarian economy. “If financing conditions remain relatively favorable for some time, this is an opportunity not only to expand, but to prepare, invest in energy efficiency, technology, in more resilient supply chains, in stronger balance sheets.”
On fiscal policy, he argued for preserving buffers and avoiding broad-based measures that may offer short-term relief while creating longer-term instability. “The lesson from recent years is not that fiscal policy should be passive, but that it should be better targeted,” he said.
He also said fiscal room was narrower than in the past, though Bulgaria still had an important advantage. The country “still benefits from a relatively low public debt ratio, and that remains an important strength.”
Radev also called for improvements in the business environment, saying that reducing administrative burdens, strengthening institutional effectiveness, reinforcing the rule of law and improving regulatory predictability had a direct economic effect by lowering costs and supporting investment.
In the longer run, resilience had to be built through adaptation rather than compensation, he said, pointing to infrastructure, digitalization, innovation, efficiency and productivity growth. He also described euro-area accession as a strategic choice that would strengthen confidence, reduce uncertainty and support long-term decision-making.
“Predictability itself is becoming a competitive advantage,” he said.
