Bulgaria's inflation at 5.2% Y/Y in Feb 2011

Bulgaria's inflation at 5.2% Y/Y in Feb 2011

Bulgaria's inflation rose 1.2% month-on-month in February, pushing annual inflation to 5.2%, data by the National Statistics Institute (NSI) showed on Monday.

Since the start of the year, consumer prices have surged by 1.9%.

The acceleration was driven mainly by the increase in food prices, which climbed by 3.1% on the month, as well as by the spike in fuel prices, with diesel fuel and petrol rising by 4.3% and 2%, respectively.

Higher prices made some economists uncertain about the recovery of the Bulgarian economy, as the rise in inflation may force households to reduce consumption, given the unchanging income of the population.

The increasing consumer prices could also hurt public finances, leading to a decline in proceeds from value-added tax and excise duty as a result of the contraction in households' spending.

In 2007 and 2008, consumer prices were growing even at double-digit rates, but income was increasing at a fast pace and lending was also on the rise, thus keeping consumption unaffected.

In a worst-case scenario, Bulgaria's economy may even shrink this year, as the effect of the declining consumption could counterbalance the contribution of export-oriented companies to the gross domestic product (GDP). In addition, it is still not clear whether investments in 2011 will exceed the level registered in the past year or remain low.

The rising consumer prices has made economists believe that this year's inflation will go beyond the government's forecast of 3.6%. /Source: Dnevnik/

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