Inflation in Bulgaria broke the record from 1998, when it was 18%, and in September it climbed to 18.7 percent, according to NSI. In Germany, there has not been such a monstrous increase in the price of goods and services for 70 years, although at the moment their inflation has stagnated at the level of 10.7%. We open a bracket to specify that the federal republic is the largest economy in the EU and under #21 in the ranking of the richest countries in the world. With very few exceptions, inflation across Europe has reached double digits and threatens to sweep popular discontent. Outside the European Union, Turkey has become a real phenomenon with a level of over 80% on an annual basis. Along with Covid-19, the supply crisis and the threat of war in nearby territory, inflation is the greatest scourge of our time. And there’s no sign of it going away anytime soon.
How to fight inflation has become a priority political decision of all countries in Europe. It is acting both according to the textbook – with the raising of the main interest rate by the European Central Bank and respectively by the national banks, and with a set of measures that each country decides for itself. The main thing is that some money is poured in to at least partially offset the rising prices and keep the disposable income of households in a decent state.
This is one of the reasons for inflation to increase further, according to financial analyst Svetozar Gledachev. And it’s not just him. More and more economists believe that helping in a difficult situation “on the cover” only fuels inflation, and the groups of people who need real help are melted away along with everyone else. Thus, if the rich only register that a luxury item has a higher price, the poor end up with dilemmas such as real cheese or cheese with palm oil. “In our country, a lot of money was given to pensioners. It’s not that they didn’t need it, on the contrary, but the money poured in without a clear rule and
they screwed up a lot of people who in the past years provided themselves with high incomes
in order to get good pensions. The rule was destroyed and this discouraged many people”, commented the analyst. This is how we got to the point where the average pension /725 BGN/ is greater than the minimum wage /710 BGN/. It is assumed that those who work are of such an age that they have to support children, and pensioners do not have such expenses.
Apart from the obvious factors that pump up inflation, there is also a new economic theory that is based on people’s expectations of price levels, Gledachev gives another detail. In our country, everyone expects that prices will rise, and they are rising. Anticipation increases demand, and in turn increases the price of the commodity, according to the basic rule of economics. That’s how it happened along the way the oil hysteria, the queues and eventually the introduction of a quantity limit, which can be bought at once, he recalls. All countries in Europe are pouring money at the moment, but not so chaotically, but much more targeted – only to large groups of needy people.
Inflation in Bulgaria is not the highest in the European Union, but we feel it most painfully because we are poor. #1 are the Baltic republics – Estonia /24.1%/, Lithuania – 22.5%, and Latvia – 22%. Our country is ranked #8 in the EU with levels of 15.6% per year /see table/. The data are from Eurostat for September on an annual basis. Especially the value for Bulgaria differs drastically from the data announced by the National Statistical Institute for 18.7%. The reason is that Eurostat uses the so-called harmonized index of consumer prices, in which goods and services have different weights than those used by NSI when calculating the index of consumer prices. However, the Eurostat method is universal and accepted for all countries in the community.
In the political chaos in which Bulgaria finds itself,
the measures are often chaotic, and some of them have an end in sight.
For example, the fuel discount will expire at the end of the month, even though it is scheduled until the end of the year. The money will run out in advance, because 150 million leva were allocated, and about 1 million leva goes from the state per day. In the parliament last week, it became clear that it is possible even after December 1, part of gas stations to continue with the discount, but there is a risk that it will remain at their expense and that there is no subsidy from the state.
Deputies will have to decide whether the discount will remain and how big it will be next month. Three bills on the subject have already been introduced in the parliament. One is “Continuing the change”, which provides for compensation to be given by taxing the excess profits of oil companies. A similar option is offered by the interim government.
On Friday, a bill was submitted by GERB. It provides for the introduction of a duty on the import of Russian oil to collect money for the payment of compensation. The party calculates that it could be BGN 1 per liter through the additional 100 million collected monthly.
The caretaker government proposed, and parliament approved, a new scheme to help businesses in 2023 for expensive electricity. There will now be two different “ceilings” – one for low and medium voltage customers and another – for high voltage customers. The latter are the large industrial plants connected directly to the ESO network, and for them the ceiling remains BGN 250 per megawatt hour. For smaller ones, the limit above which the state will intervene falls to BGN 200 per megawatt hour.
The reduced VAT on bread remains unchanged, as well as for hotels and restaurants.