Three quarters of the price decrease of the last two years can be attributed to the externally determined food and fuel prices.

The average annual inflation for 2015 and 2016 will be respectively - 0.3% and 0.7%. This is the forecast made by Kristofor Pavlov, chief economist of UniCredit Bulbank, in his analysis during the practical business forum MySuccess.bg in Finance, organized by Enterprise Magazine. Thus some steady positive values can be seen in the second half of next year. It means that although very slowly, the period of very low inflation and even of lowering of prices is coming to an end.

CPI will remain negative through most of this year. At the end of 2016 it is expected to reach an annual growth of 1.2%.

“According to the forecasts of the UniCredit economic team, only at the beginning of 2018 will the growth in prices reach the recommendable inflation values for the Bulgarian economy of around 2.5-3% on an annual basis”, Kristofor Pavlov explained. From the point of view of the economy, the already two-year lowering of the prices is not good news, mostly because it makes the recovery process more difficult.

Three quarters of the price decrease of the last two years can be attributed to the externally determined fuel and food prices (59% of the energy and 17% of foods). With some time lag though, they have impact on all goods and services.

“An additional factor which has been keeping CPI low in the last two years, is that the economy continues to work well below its full capacity for already six years”, commented UniCredit Bulbank’s chief economist.

Brent crude will reach 65 US dollars at the end of 2015 and 75 US dollars a year later, shows the bank’s analysis. At the same time with a rate of 1.05 US dollars for euro at the end of this year and respectively 1.10 at the end of next year, transport prices will continue to have a negative contribution to the overall price level in the remaining months until the end of 2015. They, however, will start having a moderate positive contribution to the overall price level from the beginning of 2016.

One of the price increase factors will be the recovery of employment, which will continue this year as well, although at a somewhat more modest pace compared to 2014.

The decreasing exchange rate of the euro in its turn can have an upward effect on the prices of electronic equipment and household goods, which come from Asia and are traditionally paid in US dollars, and increase is also expected with a number of basic raw materials as well.

More information for media:

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Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch