The European Commission raised its forecast for Bulgaria's economic growth to 0.8% of the country's gross domestic product (GDP) for 2012 and projected 1.4% and 2.0% growth for the following two years.
In May, the EU projected GDP growth of 0.5% for this year and 1.9% in 2013.
Bulgaria's GDP is projected to grow on the back of stable overall domestic economic environment and relatively strong public finances upholding consumer confidence, the EU said in its autumn economic forecast released on Wednesday.
"In addition, recent monthly data from the banking sector suggest a downward trend in both deposit and lending interest rates. Lower lending rates are expected to support a modest growth in credit with a possible lagged effect on consumption," the report said.
The EU sees domestic demand as compensating for the weaker export results, as the domestic demand took over as the main growth driver in the first half of 2012.
Household consumption is set to recover further in 2013-2014 and investment is expected to be initially supported by public sector projects funded by the EU.
Assuming a stabilisation of global energy and food prices going forward, inflation is expected to stabilize at 2.6% in 2013 and 2.7% in 2014 but core inflation is projected to pick up somewhat.