DEFLATION IN BULGARIA CONTINUES FOR THE EIGHT MONTH RUNNING

Deflation processes in Bulgaria continued for the eight month in a row in March, driven by the administrative crack down on electricity prices and external factors, Capital Daily reads. Sliding consumer prices mean smaller revenues for the state from indirect taxes like VAT.

According to data published by the National Statistical Institute (NSI), consumer prices dropped by 2.3% in March y/y and by 0.2% m/m. Analysts believe that deflation pressure will be short-lived. In its latest quarterly report, released in March, UniCredit Bulbank points to one-time components behind the price decreases – such components have been the strong wheat harvest in 2013, which pushed down food prices, and the series of administrative decisions cutting electricity and heating prices for household consumers.

UniCredit Bulbank also believes deflation will not be around for too long. This year it will be fuelled by untapped economic potential due to limited recovery and subdued lending.