Bulgarians have become used to living with bearable and relatively stable prices for the past 5-6 years, as they neither increased dramatically nor registered any significant falls. This price stability was mainly due to deflation. There have been price rises, especially when it comes to fuel prices, but the incomes of Bulgarians have been regularly and steadily growing by about 7% per year. This balance stimulated domestic consumption, which has become the main driver of GDP growth at around 4% per year.

This time of "carelessness" seems to be over as of October 1 it is likely that the balance between prices and incomes will have to be sought on another level. The most important signal in this respect is the upcoming 14% rise in gas prices on October 1and 8-percent average rise of the central heating prices. Indeed, gas prices for end-users and private consumers will only rise by about 8%. To this jump, however the previous rise from last July should be added, when it was decided that from the new heating season the price of gas was to rise by 11% and that of heating by 7%. It is now time for these two price jumps to have a cumulative negative effect on the wallets of Bulgarians with a price rise reaching between 9 and 23%. For the majority of the population, which earns close to the minimum monthly wage of 260 euros, this is a new challenge. Not only because fuel and heat prices are rising, but also because these hikes would also affect prices of other goods and services as they increase the overall costs of manufacturers and traders. There is no one else but consumers who are to pay for those creeping costs through higher consumer prices in stores. And these prices have obviously been rising for several months, while inflation in this country has reached 3.6 percent, putting Bulgaria on the second place in the European Union when it comes to rising prices. All this said by populists sounds a little frightening, but in reality the situation is not so desperate because there is a well-functioning system in this country for financial support aimed to cover the energy needs of poor citizens. This system keeps 40 million euros for about 205 thousand households.

Pro inflationary effect, however, also have salaries and pensions. Recently they have marked a steady rise, although they are still far below the average European level. However, as a whole, the well-being of Bulgarians in monetary terms has been improving and citizens becoming more and more willing to shop and save. Speaking of savings, let us mention that they exceeded the psychological limit of 50 billion levs, i.e. about 26 billion euros. By buying more and more often, consumers themselves fuel inflation. This trend will obviously not be short-lived or seasonal and in the foreseeable future rising consumer prices can be expected. This will be mainly due to the planned 10% rise of salaries of workers in the state administration and the nearly 6-percent rise of pensions. This will increase the purchasing power of a significant part of the population, hence the temptations of producers and traders to raise prices. This is a kind of a vicious circle: an increase in income equals a rise in prices, which again leads to a new increase in incomes.

We must admit, however, that we cannot speak about a real price shock and there is no crash in the purchasing power of Bulgarian consumers, as was often the case in the near past, when even a slight increase in electricity prices caused the resignation of the whole government. Now people’s economic condition has become more stable, and citizens are more experienced in terms of measures to tackle price rises in order not to overdramatize the situation. That is what the latest study of the AFIS sociological agency shows and according to it 62%, of Bulgarians now find no additional reasons to complain about their lives in comparison to the previous year when deflation was registered.

English: Alexander Markov