There is an option to deal with the price crisis by reducing the VAT for a certain basket of foods. In many of the countries where we have lower food prices compared to Bulgaria, one of the reasons is lower VAT. Already in 2022, many of the countries in Eastern Europe and the southern arc of the Eurozone began to take this type of measures – to reduce VAT on food. This is one of the reasons why eggs are cheaper in Hungary, the Czech Republic, Italy, and Austria than in Bulgaria. Macroeconomist Stoyan Panchev from the Expert Club on Economics and Politics expressed this opinion before BNR.
With a monitoring mechanism there is no way to influence prices, he was also categorical: “The measures of the caretaker government are palliative, showing concern, but not any serious strategy to deal with inflation. The search for culprits and the inspection of supply chains are more soon they open the topic and make us talk about it, but they are unlikely to lead to any changes”.
Panchev explained that he does not see where the abuse is to talk about the speculation: “We have a supply chain, in it there are different players who compete for a bigger piece of the pie. These supply chains have not changed over the years before inflation and now. It was the same in 2020 when there was deflation. There is no change in the way the big supermarket takes the cheese from the dairies.”
According to the expert, to get to the inflation, the change is in the monetary policy of the big central banks: “When this new money in the system reaches the end user, these elements of the supply chains start to see more and hurt more because final prices are getting higher. It’s not just about food prices, it’s about other sectors of the economy – health care, education and others. … Nothing extraordinary has happened in the supply chain itself in the last two years, it has inflation and now we notice it more”.
“We may already be trying administratively, with various measures from the government, to have some part of these prices reduced. An overall decline in consumer prices can only happen with a continued change in monetary policy (of central banks). With measures of the Bulgarian government, even more with the demand of speculators, will not do. … If we are looking for a way to reduce the entire inflation, it is by reducing the demand”, explained the economist.
