Банкеръ Weekly

Briefs

4,837% INFLATION HAS ACCUMULATED IN THE YEARS OF TRANSITION

Mr. Hadjiiski, the National Statistics Institute reported a record inflation for the first quarter of 2006. Are excise duties on cigarettes and alcohol drinks the only ones to be blamed for the price explosion?
- Excise duties are the direct culpable for the swelled inflation, of course. This can be seen very clearly in the so called standard basket which contains about 520 goods and reflects the consumer prices index. However, it also feels constant pressure by the fuels - some 0.4-0.5% a month. Nobody would try to give a precise forecast about their weight in the depreciation as the pressure goes in all directions.
There are also curious figures in the small basket which only contains vital commodities and concerns consumption of the 20% of households with the lowest income. There, the influence of the excise duties is felt much less. The inflation accumulated from the start of the year is 0.6 per cent. If the results are compared, it turns out that fuels have contributed to the 1st quarter inflation most. However, this is a world trend which is force majore to the Bulgarian economy and will probably continue.
Government financiers predict now that the lev devaluation will calm down. Is it possible that plans about a 6% inflation for 2006 appear too optimistic?
- I expect a significant fall of inflation in the summer. As a whole, life gets cheaper during this time of the year. This has been the tradition for many years, but talking about percentages is not serious yet. It is risky to make forecasts, because later on there are always attempts to make the results around the forecasts. Besides, from a statistical point of view, inflation indicators are very responsible and also unpredictable. For example, a few years ago there was speculation with the prices of vegetable oil which resulted in a boom of the prices and a surprising jump of inflation.
At present, the market seems to remain calm. I do not expect speculative increases of the prices in the next five or six months. Neither are there reasons for new inflation processes.
Won't the coming increases in the prices of central heating and electricity raise the inflation beyond the level predicted by the Government?
- Inevitably, if prices grow as much as they are commented now, inflation will grow by 0.3-0.4% a month in the last months of the year. Respectively, the 2006 annual inflation will be higher than the one planned in the budget.
Isn't this perspective disturbing?
- Yes, it is, because we have a much higher inflation compared to the European norms. The day of our integration into the euro zone is getting closer, but we are far from meeting the Maastricht criteria. However, what is more alarming is whether the figures of the Bulgarian inflation are correct. I do not mean the points calculated by the National Statistics Institute. They are 100% accurate. I rather worry about the lack of concrete analysis of the reasons for the depreciation - what is the excise duties weight, how much the fuels contributed, etc.
Like every Bulgarian man I am glad to hear that a low inflation and a high growth of GDP are reported. But there is concordance of the data - it is never said that there are a high growth and a high unemployment rate at the same time.
Have surveys been made about the extent by which Bulgarian people have become impoverished during the years of transition? In fact, how much is the inflation accumulated since then?
- If we accept that the base inflation was 100% in 1990, then it is 4,837% in May 2006. It means that the index of consumer prices has jumped 48 times in Bulgaria for fifteen years. Of course, the biggest shock came in 1996 and 1997. At that time inflation grew more than 30 times.
In fact, these conclusions reflect the index of consumer goods and are applied in accordance with the requirements of Eurostat and the International Monetary Fund.
By the end of the current year, the National Statistics Institute will also introduce the so called harmonized inflation index. It is valid for all member states of the European Union. The model of the index is constructed in a way that makes commodities in the consumer baskets almost identical in all European countries. That is why inflation measured by the harmonized index is European and not national, with differences among the countries not exceeding 0.1-0.2 per cent.
Statements can be heard that it is the high inflation that may cause recalculation of the lev-euro rate. What is your opinion?
- Yes, we hear statements of the kind. Basically, the National Statistics Institute calculates everything in dollars - trade, gross domestic product per capita, etc. The transformation into euro is still to come. It is not that simple to say one lev is equal to EUR1.9558. There is a very curious survey of the purchasing power parity in the European countries that we are conducting. It shows how much the Bulgarian consumer can buy with his income compared to the European citizen - for example, a Swiss, a Dutch, etc. We reach about 35% of the income in the European Union. However, there are no concrete and thorough comparisons for each group of commodities, therefore the conclusions cannot be too concrete.
That is why ideas for changing the lev rate based on the high inflation thesis are not well sustained. It is logical, since inflation is being imported in Bulgaria with the money, the lev to euro rate to change, too. But if we look at the goods that we export - they do not change their prices.
According to the research of the National Statistics Institute, Bulgarian people's food costs have been falling in the past years. Is this a positive trend?
- Four or five years ago, households spent about 40% of their income on food, whereas the figure is 35% today. This is positive from an economic point of view and in a way it is a European trend. However, there are local differences. And we cannot say that Bulgarian people have grown richer, even though the real income has increased. Some time ago we examined the poverty in the country together with the World Bank. We found it hard to convince our partners that there were poor people who own 50 dka of agricultural land. However, there was no liquid land market in Bulgaria at the time.
It is to be noted that the structure of Bulgarian people's consumption has changed in the past years, too. The consumption of commodities such as bread, pork, alcohol is shrinking on the account of vegetables and wine.
You have been heard saying that there may be political influence on the National Statistics Institute. Are there any attempts during the ruling of the three-partite coalition among the Bulgarian Socialist Party, the National Movement Simeon II and the Movement for Rights and Freedom?
- A few years ago there were attempts for intervention in the statistics institute's activities as well as inaccurate interpretation of the data by certain political forces. But I think that the present Government realized that it was the greatest consumer of statistical information. That is why there is so much interest in the correctness of the information. Besides, it is unconditionally clear that the figures reported by the National Statistics Institute cannot be manipulated. The Statistics Chapter was among the first opened in the process of negotiations and is one of the few green zones in the assessment of the European Commission. The figures are sent to Eurostat, no remarks have been made to our work and there is no way to press them...
Isn't it embarrassing that the National Statistics Institute still holds the monopoly over the statistical information in the country?
- The National Statistical Institute has a kind of a natural monopoly over statistics. There is no other organisation that can monitor 4,000 commercial sites throughout the country, or 3,000 households. A concept about a new strategy for organisation of the statistical system in the country is now being considered. It will be put forward to the Council of Ministers by year-end. The major point is the future decentralisation of the system. The 28 regional centres that the institute has in the country now will shrink to six in the planning areas. At the same time, the statistics will be able to take information from other organisations, ministries and departments. There is no need for us to visit the schools since there is an education ministry that keeps a data base. Construction and agricultural registers can be used, too.
An INTRASTAT act is expected to be adopted soon. How will foreign trade statistics change?
- Actually, this is an act on the statistics of internal community commodity trade. Once we join the European Union, let's hope it will happen at the beginning of next year, we'll have to consider this peculiarity, too. And since there are practically no boundaries among the European Union member states, we no longer talk about import and export but transfer of goods. Declarations that companies trading with European Union members will submit will be different and even simpler. Trade with other countries will be reported as usual - through customs declarations.
The introduction of the INTRASTAT system has been under preparation for several years. Experts from the National Statistics Institute, the Customs Agency, and the National Revenue Agency are working to make this enormous project reality. And here is the final stage - the adoption of the law. INTRASTAT will be introduced as a test in the autumn. The tests will last four months - until the end of the year. From January 2007 the system will start operating officially, provided that Bulgaria becomes a member of the European family.
Obligations to provide data under the INTRASTAT system will only be imposed on companies registered by value-added tax which trade in goods from the community in annual amounts beyond the established declaration levels. To optimize the process of data collection, operators will provide the declared data electronically, with electronic signature.

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