Bulgaria’s inflation

SOFIA (Reuters) – Bulgarian consumer prices will rise further in December, keeping the year-end annual inflation rate in double digits, Finance Minister Plamen Oresharski said yesterday. High food prices and strong domestic demand accelerated inflation in the new European Union member to 12.6 percent year-on-year in November, one of the highest in the bloc. Inflation has been in double digits since August. «Unfortunately, the inflation will most likely be in double digits at the end of the year… I expect it to be between 10 and 12 percent,» Oresharski told national radio BNR. «Inflation in December is going to be higher than in the past months, as many bonuses are paid then and consumption speeds up as well,» he said. The Socialist-led government had earlier expected inflation to ease back to single digits at the end of 2007 and had forecast EU-harmonized inflation at 9.3 percent for the period. Officials said the surge in consumer prices was a one-off due to poor grain crops and forecast inflation will slow to 4.5 percent at the end of 2008, despite expected increases in prices of gas, heating and cigarettes. Analysts say the economy is overheating due to rising growth and booming consumption, as Bulgarians rush to buy big-ticket goods after years of austerity under communism and the difficult years that followed after its collapse in 1989. Oresharski said he expected economic growth to accelerate to 6.5 percent this year, up from 6.1 percent in 2006 and foreign direct investment to exceed -5.0 billion, up from 4.4 billion last year. «These huge foreign investments, however, lead to a very sharp increase on the broad money supply, domestic demand and the current account deficit,» he said.