Inflation in the two years of Bulgaria's membership in the European Union was just above 20 per cent, data of the National Statistical Institute has showed. The rise in prices was offset by a steady wage growth, which exceeded 30 per cent in some sectors as both prices and salaries converge with the levels in older members of the bloc.

However, over the last months, the trend started to reverse, driven by seasonal factors and by the current global economic and financial crisis, which forced Bulgarians to tighten their belts and so prices started to fall.

Thus, the Bulgarian economy registered deflation for a second month in a row, and the annual inflation for 2008 was much lower than the previous year. The country's December consumer price index slipped 0.2 per cent. The recent food and oil price drops decelerated end-year inflation to 7.8 per cent from 12.5 per cent for 2007, under official statistics.

The data ties up with the Government's forecast for a single-digit inflation made early last year.

Inflationary pressures eased in spite of record highs in the early and summer months of the year, when food and oil prices powered up consumer prices the hardest since 1997.

Most experts project the inflation will continue to slow down through 2009, and the new challenge for the Bulgarian economy will be sustaining growth.

Bulgarian inflation should ease to a single-digit figure this year, but deflation is not out of the way, threatening to sink demand and consumption, said Vladislav Penev, board chairman of asset manager Status Capital.

Source: Dnevnik