Prices in our country can be regulated by implementing economic measures, and not through punitive and administrative measures. This was commented on by economist Rumen Galabinov on Darik. According to him, in recent months a situation has been created in our country in which producers and traders are rushing to reinsure themselves by raising prices, since they do not know what will happen in a few months. According to him, it is necessary to implement purely economic measures to pressure prices.
The state has taken the right step with the new law on the introduction of the euro and increased control over prices, but the challenges facing the Bulgarian economy remain, said Rumen Galabinov, outlining the key problems and opportunities facing the country.
The long supply chain makes food more expensive
According to Galabinov, the new state powers to control prices must be applied carefully and with justification.
„In Bulgaria, we have a very long supply chain, especially in the food sector. Often, goods become more expensive by 30-50% not because of added value, but because they pass through too many hands - buyers, re-buyers, re-packers.“
He called for optimization of the process and more balanced prices. In addition, Galabinov stressed that local food production is not competitive enough, which increases dependence on imports.
Reduced VAT for food and medicines - an inevitable step?
The economist also pointed to another important reform - the introduction of a lower VAT rate for food and medicines.
„Bulgaria is the only country in the EU where food, medicines, cigarettes and alcohol are taxed with the same VAT. This in no way motivates society to live healthier.“
He called for the reduction to be included in the budget for next year, emphasizing that a similar practice exists in all countries of the eurozone.
The euro will not be to blame for inflation
Regarding fears of price increases when the leva is exchanged for the euro, Galabinov is categorical:
“So far, experience has shown that even without the euro, we have an increase in the price of goods.“
As the main reasons, he pointed to problems in the domestic economy - long supply chains, high VAT and insufficient local production - as well as external factors such as customs duties, international trade and military conflicts.
According to him, the introduction of the euro will bring quick and tangible benefits:
“In the first months we will feel the effect of saved transaction costs, facilitated money transfers and better access of Bulgarian businesses to the European financial market.“
External factors – tariffs and conflicts
The economist warned that the new US tariffs on European goods will lead to a global increase in trade prices.
„The increase in costs in international trade is always passed on to the end consumer.“
He added that unpredictable military conflicts also have a direct impact on the prices of commodities.
The budget remains under control, but expenses must be kept in check
Galbinov reassured that the deficit is not a problem for now:
„It is still below 2% in the first half of the year at a limit of 3% – calmly, let's not exaggerate.“
However, he warned that the main challenge is to contain spending until the end of the year and not resort to unnecessary updating.
In the draft for the next budget, the economist sees a need for three key things:
Reducing VAT on food and medicines;
Reforming and restructuring the economy in order to attract investment;
Maximum absorption of European funds, including under the Recovery Plan and new rearmament programs.