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Economists predict zero inflation in Bulgaria
11.12.2009   (Dnevnik)

inflation

Deflationary processes will continue to whirl the Bulgarian economy for some more time but are still far from having any serious influence, economists polled by Dnevnik said yesterday ahead of Monday’s release of the official consumer price index figures.

“There are indeed deflationary conditions in our economy. Funding remains tight. Against the backdrop of a currency board and small foreign direct investment, one factor that could trigger a substantial increase in money supply, thus stoking inflation, could be a rise in private or government savings, which can hardly be expected,” said investment advisor Georgi Balgarski.

“The inflation will probably hover around zero,” predicted Tsvetoslav Tsachev, senior analyst at investment brokerage Elana Trading.

The prices of goods and services in Bulgaria slipped by 0.3% on an annual basis in October, their first drop in ten years. The downtick was attributed to sluggish consumption that forces retailers and producers to cut prices. Prolonged deflation could spark company failures, lower employment and incomes and tip the economy into depression.

Analysts say there is nothing to worry about at this stage.

“It’s seems food prices have not gone down but rather increased as the holidays approach. Given that energy raw material fluctuations are responsible for much of the deflation, there’s no risk of a pronounced downward price trend,” according to Tsachev.

Food items form more than one-third of the total expenses of Bulgarian households.



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