RECORD LOW INFLATION IN BULGARIA

The lowest inflation rate has been recorded in Bulgaria for the past 23 years. According to data from the National Statistics Institute (NSI) this equates to deflation of 1,6 %.

Experts in statistics say the negative annual inflation rate results from the reduced prices of electricity, heating and foods during the past year. These products have a significant role in the basket of goods and services used to track inflation.

According to economists however deflation means shrunk consumption, not so much because people do not have money to spend, but because they fear for their future financial security.

Since 1991 the annual inflation rate has never been negative. The lowest inflation was reported in 2009 when its rate was 0,6%. The highest inflation rate of 547% was reported in 1997. Experts in statistics say that the deflation for 2013 was not a surprise to them.

Albena Dancheva, the Head of ‘Statistics of Consumer Prices’ department of NSI comments that the group of goods including foods (bread and meat), heating and especially electricity contribute so significantly to the overall value of the basket that when they decrease in price – electricity price was reduced twice and heating price once in 2013 – this automatically leads to deflation and even the increase in fuel prices during the year could not reverse the trend.

Professor Garabed Minasyan from the Institute of Economics of the Bulgarian Academy of Sciences says that price reduction has an adverse effect on production because companies expect to sell the products they manufactured yesterday at adequate prices tomorrow.

He adds that signs of deflation were noticed as far back as the spring of 2013, but at macroeconomic level this worrying trend is avoided and even the inflation rate set in the budget is below the inflation in the Euro Area

In his opinion, it is advisable that the inflation rate in Bulgaria be higher than the rate in the Euro Area in order to overcome the differences in prices.

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