The International Monetary Fund (IMF) has almost doubled its prognosis for the Bulgarian inflation for 2007, from 4.5 to 8 per cent.

At the same time IMF increased its expected budget deficit from 16.6 to 20 per cent of GDP at the end of 2007, Dnevnik daily reported.

IMF motivated its increased inflation prognosis with the higher-than-expected rise of food prizes because of drought and floods. Budget deficit was expected to increase because imports were growing faster than exports, the newspaper reported.

This was announced by Juan Fernandes-Ansola, regional representative of the IMF for Bulgaria and Romania before the start of his mission in October.

Bulgarian government expected 3.5 per cent annual inflation. Finance Minister Plamen Oresharski has said that these figures would need to be adjusted. Over 2006 the consumer inflation was 6.5 per cent.

IMF expected inflation to drop to 4 per cent over the next year. The 2007 inflation is “a temporary peak caused by external factors, and not so much by long-term trends”.

“It cannot be denied that this year's inflation is problematic. It is important to maintain discipline regarding salaries and to avoid unsound indexing,” said Fernandes-Ansola to Dnevnik daily.

The credit shock on the international marked could have “indirect consequences for Bulgaria” and “make financing more complicated”. Fernandes-Ansola said it is important “to continue to attract foreign investors through stable politics”.