ECONOMY

August inflation falls sharply in Bulgaria

SOFIA – Bulgarian inflation fell sharply in August, data showed yesterday, but economists said higher oil prices following the attacks on US targets could frustrate government attempts to reduce it to 4.5 percent by end-2001. Year-on-year consumer price inflation eased to 5.7 percent, its lowest level since 1999, from 8.5 percent in July although prices rose 0.3 percent month-on-month after falling in each of the two previous months, the statistics office said. The government’s end-2001 target of 4.5 percent inflation could be attained but a rise in oil prices as a result of the attacks means that target could be exceeded, Charles Robertson, Emerging Europe Economist ING-Barings told Reuters by telephone from London. Bulgaria is a net importer of oil which it pays for in dollars. Andrew Roberts, market analyst at Schroder Salomon Smith Barney, also said a rise in world oil prices as a result of the attacks on the USA could boost Bulgaria’s inflation. What we’ve seen recently is that higher inflation in Bulgaria resulted from external factors. The currency board remains the best instrument to control inflation despite the impact of external factors like higher oil prices, Roberts said by telephone from London. We were looking for 0.4-percent inflation in August, so the actual figure is very close to expectations. It’s one of the best August figures, said Robertson. Cumulative consumer price inflation for the first eight months of this year was 0.9 percent. This is the lowest year-on-year inflation we’ve seen since 1999, it has nearly halved from 11.4 percent in December 2000, Robertson said. Non-food prices rose 2 percent in August and cost of services climbed 0.2 percent. Food prices eased by 0.7 percent. It (August inflation) is a very good number and in line with our expectations, said Roberts. He saw Bulgarian end-year inflation at 5 percent. Bulgaria operates a currency board system that includes a fixed lev/euro exchange rate. The system aims to curb state spending, ensuring that levs in circulation match foreign exchange reserves.