site.btaCentral Bank Deputy Governor Warns of Huge Risk of Entering Inflationary Spiral

Addressing a forum here on Tuesday, Bulgarian National Bank (BNB) Deputy Governor Kalin Hristov warned that there is a huge risk of entering an inflationary spiral. The forum was dedicated to the risks and benefits of Bulgaria's accession to the eurozone.

Hristov insisted on targeted measures for the most vulnerable groups in society, instead of the mechanical application of anti-inflationary measures. Those who are most vulnerable must be helped, he added, noting that people like him do not need anti-inflationary measures. According to him, world history shows that high inflation is stopped by positive real interest rates and recession.

The BNB Deputy Governor also spoke about global inflation. "In order to define policies and measures, we need to understand its nature. The diagnosis of the current inflation is that we have one of the most difficult to control, difficult to manage and difficult to suppress kinds of inflation, similar to that of the 1970s up to the early 1980s. Globally, it is a combination of two shock factors," he explained. One includes global supply factors (prices, supply chains, increased costs) and global shrinkage of the workforce, expressed in shrinking labour supply. On the other hand, there is demand shock: a very strong and unsustainable inflation of demand due to wrong fiscal and monetary policy in the main economic zones - the United States and the eurozone, explained Hristov.

He noted that by 2030 Bulgaria's workforce will shrink by 10 percentage points.

In the course of the discussion, Movement for Rights and Freedoms deputy floor leader Yordan Tsonev noted that there are five former finance ministers in the conference hall, but the current one is not there, which Tsonev described as scandalous.