Bulgarian Inflation June 2007

From Bloomberg today:


Bulgarian July Inflation Picks Up on Food, Services

By Elizabeth Konstantinova

Aug. 13 (Bloomberg) -- Bulgarian inflation accelerated in July as a drought and higher fuel costs pushed up prices for food, services and transportation.

The inflation rate rose to 8.4 percent from 5.6 percent in June, the National Statistics Institute reported today. Consumer prices rose 2.2 percent in the month after falling 0.4 percent in June. The result exeeded the median estimate of three economists for an annual rate of 6.7 percent in a Bloomberg survey.

Hot and dry weather in June and July, which destroyed crops, and high fuel prices make it tougher for Bulgaria to curb inflation as it prepares to lock the lev to the euro in the exchange-rate mechanism, a system that tests currency stability before euro adoption. The Balkan country wants to enter the mechanism this year and switch to the euro in about 2010.

``The data clearly shows that the government's inflation target will be overshot,'' said Georgi Angelov, an economist at the Open Society Institute in Sofia, in phone interview today. ``Food prices will remain higher than in previous years and the July electricity price hike will affect many prices the coming months.''

The government's inflation forecast for this year is 4.5 percent.

Food Prices

Food prices, which account for 35 percent of the consumer- price basket, rose 3.9 percent in July after declining 1.3 percent in June. Service costs rose a monthly 2.7 percent.

Transportation costs, which include gasoline prices and make up 17 percent of the consumer-price basket, rose 0.2 percent in July, after a gain of 0.4 percent in June. Spending on leisure and entertainment rose 3.6 percent in the month.

The government increased excise duties on various types of fuel by as much as 15 percent in January to bring them to EU levels. The inflation rate reached a 21-month low of 4.1 percent in March as the cost of food and imported cigarettes declined after the country joined the European Union on Jan. 1.

UniCredit Group SpA estimated in a July 5 report that the inflation rate would reach 5.1 percent this year. The bank forecast that higher costs for fuel, natural gas and electricity will drive prices in the second half of the year.

The International Monetary Fund scaled down its Bulgarian inflation forecast to less than 4.5 percent for this year after a May 7 estimate of 4.6 percent. The European Commission, the EU's executive arm, forecast inflation this year at 4.2 percent on May 7.