Prices in Bulgaria fell for a second consecutive month in December to drag the full-year inflation figure to 7.8 per cent, below the eight per cent estimates announced by the Finance Ministry and Bulgarian National Bank in the summer, and well short of the 12.5 per cent figure recorded in 2007.

The consumer price index (CPI) shrank by 0.2 per cent in December, which followed a 0.1 per cent decline the previous month, preliminary data released by the National Statistical Institute (NSI) on January 13 2009 showed. Year-on-year inflation fell to 7.8 per cent, a sharp drop from the 9.1 per cent recorded a month earlier.

Deflation in December was caused by a 0.9 per cent drop in non-food prices, the second straight month of decline, and a 0.3 per cent drop in food prices. Services prices were 0.5 per cent higher for the month.

The harmonised consumer price index, the figure calculated by the statistics board for comparison with inflation in the European Union, recorded an even larger decrease, shrinking by 0.4 per cent in December, while the year-on-year inflation figure fell to 7.2 per cent. In November, the harmonised CPI fell by 0.4 per cent and was 8.8 per cent year-on-year.

The Cabinet had targeted a harmonised inflation figure of 4.5 per cent for the year, according to the macroeconomic framework used to draft the 2008 budget, and has not officially revised it.

But in July, the central bank said that it expected year-on-year inflation, which peaked at a ten-year high of 15.3 per cent in June, to go down in the second half of the year and reach eight per cent by end-2008, an estimate echoed by Finance Minister Plamen Oresharski.

For 2009, the Government targets inflation at 5.8 per cent on the expectations of reduced consumption as the global financial crisis will become increasingly felt in the country.