site.btaInflation in Bulgaria Is Creeping, Not Galloping - Expert

Judging by the latest data of the National Statistical Institute (NSI) reporting Bulgaria’s September year-on-year inflation at 18.7%, it can be classified as creeping, not galloping inflation, said Prof. Dr.Tatyana Hubenova of the Economic Research Institute with the Bulgarian Academy of Sciences. Hubenova, who also chairs the Association of Economists in Bulgaria, was asked to comment on the NSI data released on Monday for BTA. 

Inflation in Bulgaria can still be classified as “creeping”, depending as it does on the prices of certain goods and services determining the rising costs of business and people, Hubenova said. What is most concerning to her is the rise in cost-push inflation as a result of both rising energy prices and things like increased education costs (by +5.4% in September compared to August 2022) and medicines, meaning seasonal expenses for households. This has made an impact on the total consumer price index, Hubenova said.

Energy inflation (up 4.2%) ranks second in terms of concern for household costs covering housing, water, electricity and gas. This is followed by inflation in foods and nonalcoholic beverages with a 2.3% rise and household basic costs have risen generally, said the expert. 

Considering that and the NSI measurement of the 20% lowest income households for just food and nonalcoholic beverages in September compared to August, the expert said inflation rates will increase inequality. In their case these are higher than the average, with 4.7% registered for non-food goods. This entails the subject of incomes policy and its implementation based on agreement in the tripartite partnership of government, employers and trade unions, prof. Hubenova added.

Some good news include the summer and autumn EU forecasts of toning down inflation in the Union in 2023, the European Commission seeing the harmonized annual consumer price index for Bulgaria dropping to 6.8%. More specifically, this could be achieved by specific steps for moderate raising in interest rates. The aim is to calm down inflation rates in the medium term, which in turn will reduce irrational credits, the expert pointed out. 

Besides, private consumption in Bulgaria is already shrinking because of the deteriorating consumer confidence since March, a trend which will continue and will curb demand and growing prices. 

Then again, Bulgaria’s low unemployment rate is a positive phenomenon, its 4.5% revealing the nation’s rational response to the decline in real purchasing power of incomes due to inflation.

In the medium term, a lot will depend on the formation of a working government, one with a clear budget policy supporting the fight with inflation and its fairer distribution, Prof. Hubenova thinks. It is challenging for Bulgaria’s economy to both keep its workforce in the conditions of fighting inflation and fo on to raise wages according to the quality of labour and the increase of labour productivity in the working sectors of the economy in order to avoid the unwanted syphoning of workforce to other countries, she added.