Bulgarian inflation will slow this year from 2007, helped by lower food prices as the country expects a better harvest, said Dimitar Kostov, the deputy central bank governor, Bloomberg reported.
``We expect the inflation rate will total between 7 percent to 8 percent in 2008,'' said Kostov today in an interview in Kiev, where he is attending the European Bank for Reconstruction and Development annual meeting.
Bulgaria and the Baltic states of Latvia, Lithuania and Estonia are struggling to slow the European Union's fastest inflation because their currency board systems limit options for central banks to stem price growth through interest rates. The nations need to hold down inflation so they can adopt the euro.
Bulgarian inflation reached 14.6 percent in April, the highest rate since 1999, on rising fuel and food costs. Bulgarian central bank governor Ivan Iskrov forecast on May 16 this year's EU-harmonized inflation to slow between 6 percent and 7 percent. Latest available inflation forecasts for Bulgaria from international institutions range from 9.1 percent to 9.9 percent for 2008 and from 5.9 percent to 6.0 percent for 2009, the European Central Bank said on May 7.
Euro-adoption targets for most central and eastern European nations have been pushed back as far as 2013 and 2014 because of accelerating inflation, said UniCredit Group SpA in a May 12 report. Bulgaria and Romania, which joined the 27-nation bloc in 2007, will meet terms for euro adoption by 2014, the bank forecast.
Kostov declined to comment on when Bulgaria will be able to join the single currency.
``It is not important for the country when it joins the Eurozone,'' said Kostov. ``What is important is to put Bulgaria's macro-economy on the level at which it will get benefits from euro adoption.''
Bulgarian's economy will probably expand as much as 6.5 percent in 2008, said Kostov. The EBRD forecast Bulgaria's economic growth at 5.5 percent this year.
Kostov said the Bulgarian central bank is capable of withstanding external pressure caused by spill over of the global liquidity crunch. The bank's foreign currency and gold reserves were 12 billion euros ($18.8 billion).
``Even if everyone in Bulgaria had come to us with their lev, we would have been able to give them euros,'' said Kostov. ``And still we would have been left with 45 percent of our reserves.''
Lending growth will probably slow down to 40 percent in 2008, from 60 percent in 2007, as a result of the central bank's tighter bank supervision measures aimed at cooling credit growth, Kostov said.
He said Bulgaria's real estate boom was unlikely to end in a hard landing as ``there is still room for property price increase.''