You are in Home > News > Macroeconomic developments > CPI inflation in Bulgaria stays much higher than the one in the Eurozone. However we do no see any r...
- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
CPI inflation in Bulgaria stays much higher than the one in the Eurozone. However we do no see any risk of that “overvaluation” of the local currency.
submited on 13.10.2006 in category Political stability | Monetary policy | Macroeconomic developments
submited on 13.10.2006 in category Political stability | Monetary policy | Macroeconomic developments
In Bulgaria, CPI inflation was 5.6% in the year to September, while in the Eurozone it was 2.3% (to August). CPI is a measure of nominal cost of living of the average citizen of Bulgaria rather than of the monetary inflation of the local currency.
Meanwhile monetary inflation (measure through prices of industrial commodities and gold) of both euro and lev remain significant. The Economist Commodity Price Index went up 45% in the year till September. Gold has apparently served as an escape from the lead currencies in an age of quick depreciation of their value. Demand for gold remain high and its price in euro rose by 28% in the year to September.
Effectively both Eurozone and Bulgaria use the same currency as exchange medium. That is, for both economies monetary inflation must be one and the same. In Bulgaria, however, money grow faster (by 23%) than in the Eurozone (some 8% growth). Theoretically, we may speak of “overvalued” lev at the current fixed exchange rate. But we do not see any reason to talk of lost competitiveness or macroeconomic risks due to “mismatch between real and nominal exchange rates”.
Bulgarian banks expand their credits much quicker (by 24% in the year to August) than the banks in the Eurozone (some 11% credit growth), which is behind the quicker monetary expansion in Bulgaria. Those credits so far have been channeled predominantly to real estate, which we prove by the quicker growth of property prices. Most of the “newly printed” money stay blocked in local assets rather than serve international exchange. Thus we see no macroeconomic risk behind quicker monetary growth in Bulgaria than in the Eurozone.
Meanwhile monetary inflation (measure through prices of industrial commodities and gold) of both euro and lev remain significant. The Economist Commodity Price Index went up 45% in the year till September. Gold has apparently served as an escape from the lead currencies in an age of quick depreciation of their value. Demand for gold remain high and its price in euro rose by 28% in the year to September.
Effectively both Eurozone and Bulgaria use the same currency as exchange medium. That is, for both economies monetary inflation must be one and the same. In Bulgaria, however, money grow faster (by 23%) than in the Eurozone (some 8% growth). Theoretically, we may speak of “overvalued” lev at the current fixed exchange rate. But we do not see any reason to talk of lost competitiveness or macroeconomic risks due to “mismatch between real and nominal exchange rates”.
Bulgarian banks expand their credits much quicker (by 24% in the year to August) than the banks in the Eurozone (some 11% credit growth), which is behind the quicker monetary expansion in Bulgaria. Those credits so far have been channeled predominantly to real estate, which we prove by the quicker growth of property prices. Most of the “newly printed” money stay blocked in local assets rather than serve international exchange. Thus we see no macroeconomic risk behind quicker monetary growth in Bulgaria than in the Eurozone.
What is your opinion about this article?
0 agreed
0 disagreed