20.03.2023
BNB WITH INFLATION FORECAST IN OUR COUNTRY
Based on managers' expectations for sales prices, our assumptions about changes in commodity prices in international markets and labor market conditions, we forecast inflation in the first six months of 2023 to follow a gradual downward trend. This is according to the forecast of the BNB, says the publication "Economic Review".
Factors that are expected to continue to have a pro-inflationary impact are the projected substantial growth in unit labor costs and private consumption, the persistence of high inflation in industrial goods in Bulgaria's main trading partners, as well as the elimination of some of the introduced by government fiscal measures. Food inflation rose to 25% in December 2022 (compared to 8.1% at the end of 2021).
This group had the largest positive contribution to headline inflation, which was due to both processed and unprocessed foods. In the group of unprocessed foods, a price increase of 22.3% was recorded on an annual basis in December 2022 (compared to 6.0% in December 2021), the analysis stated.
The subgroups "meat and meat products" and "fruits and vegetables" contributed the most to the increase in the price of unprocessed foods, which can be explained by the higher import prices of these products, as well as the increased costs of local production in line with with the rise in prices of products and services used for intermediate consumption in agriculture. Annual inflation in the processed food group reached 26.3% in December 2022 (at 9.2% at the end of 2021). The subgroup "milk, milk products and eggs" had the biggest positive contribution, followed by "bread and cereals" and "sugar and chocolate". The increase in the price of the listed foods was determined by the upward dynamics of import prices, as well as by the growth of producer prices in the processing industry in the conditions of a significant increase in the price of agricultural production in the country and higher costs of companies for salaries, electricity, fuels and other materials, emphasized by the BNB.
Regarding income, the bank reports that household incomes in nominal and real terms have continued to rise. “Gross household income in nominal terms rose by 21.1% year-on-year in the third quarter of 2022, with the main contributor to the increase being the increase in pensions, followed by growth in wage income. A year-on-year increase in the third quarter of 2022 was also reported in household income from savings withdrawals, while the amount of loans and credits received decreased year-on-year.
In real terms, annual growth in total household income also accelerated in the third quarter of 2022 from the second quarter, reaching 5.1%.
Pension income rose by 25% year-on-year in real terms in the third quarter of 2022, while wage income in real terms fell for the second quarter in a row by 3.9% year-on-year. Stronger growth in total household income in real terms, while wage income, which has a major share of total income, fell, was due to an increase in alternative sources of income for households, such as pensions, property income, sales income and social benefits.
In line with stronger growth in total income, real household disposable income growth also accelerated to 6.7% year-on-year in the third quarter of 2022, following an annual increase of 4.3% in the second quarter of the year,” the analysis said.
The BNB expects a weakening of economic activity in the first half of 2023, which will be contributed to by both the projected decrease in stocks in the economy and the expected weaker export of goods as a result of the deteriorating global economic situation and factors specific to Bulgaria.
