site.btaBulgaria Sees 3,800-Fold Price Rise, 1989-2020 - Study

The highest inflation which the Bulgarian economy has experienced over the last 270 years came in the 1990s, according to a study by the Economics Faculty of Sofia University which was presented by Associate Professor Ralitsa Simeonova-Ganeva and Associate Professor Martin Ivanov on Nova TV at the end of November.

The study shows that between 1989 and 2020, in the so-called years of transition, prices in Bulgaria rose 3,800-fold. "This is a terrifying conclusion. What is even more terrifying is that it happened in our lifetime," Ivanov commented.

The estimates were made using an index which took the research team almost two years to devise. The index is based on a small basket of only 20 commodities and services, which is why it may scale down some price peaks. Official data for the period from 1991 to 2020 show that prices increased 5,000-fold.

The price rise in the 1990s was even steeper than the inflation after each of the two World Wars (1914-1918, 1939-1945), let alone the Balkan Wars (1912-1913) or the Unification of Bulgaria (1885), the report says.

In the earlier part of the 270-year period in review, people grew their own food, which was a kind of a cushion against crisis.

Looking at separate commodities, the price of bread fluctuated rather moderately. It soared around the end of the 18th century and the beginning of the 19th century after the eruption of a volcano in Iceland, which affected three continents. The impact of the eruption was compounded by a weakening of the government and a 50-year period of lawlessness.

The bread price also rose at times of economic upsurge on local markets, which were highly fragmented until the 19th century, and then around the World Wars. This caused much trouble for the communists, who took over in 1944 and were faced with the daunting task of containing the price of this essential product.

Bread and other staple goods became much more affordable after Bulgaria joined the European Union in 2007 (alcoholic drinks were a notable exception). This was contrary to the general fear that prices would soar as the market was liberalized. If one looks at the same basket of products and services before and after EU accession, prices actually went down.

Sugar used to be a luxury, but now it is quite affordable, the researchers say.

Meat consumption was limited during the communist regime (1944-1989). Until the middle of the 20th century, meat was consumed almost only on holidays. In the early years of the post-1989 transition to a market economy, meat became widely available, but prices soared and remained high until Bulgaria's accession to the EU in 2007.

Tobacco has been getting increasingly unaffordable due to the EU excise duty policy. Alcoholic drinks were less affordable under the communists, and the variety of alcoholic products was limited. At present, the alcohol market is highly developed, and changes in consumer behaviour have made home-produced alcoholic drinks less common.

From 1848, when the earliest surviving Bulgarian household budget was documented, until the late 1980s-early 1990s, food accounted for between 45% and 50% of the expenses of the average household. The ratio did not fall under 40% until just before EU entry. "This means we are practically the wealthiest generation in all 13 centuries of Bulgaria's history, although we cannot feel it, because nowadays we have a much better view of what is going on in the world," Ivanov said.