Page 34 - SE Outlook Regions 2022

significantly, but that was not enough to compensate for the still large
gap with pre-pandemic levels, according to the EBRD.

2.3.3 Inflation and monetary policy

In line with global trends, inflation in Bulgaria increased in the autumn
of 2021, due to a combination of rising food and energy prices, as well
as strengthening domestic demand weighing on core inflation.
International institutions expect that the price hikes will ease off in the
second half of 2022.

Bulgaria’s consumer prices increased by 6% y/y in October, beating the
nine-year peak reached a month ago when CPI grew by 4.8% y/y. The
consumer price index (CPI) moved up 5.4% compared to December
and by 1.8% month on month, according to statistics office data.

Food prices increased by 5.9% y/y in October, after rising by 4.4% y/y
in September. Annual consumer price inflation was more significant in
transport (up 19.7% y/y), housing (up 9% y/y), arts and entertainment
(up 6.9% y/y) and alcoholic beverages and tobacco (up 5.9% y/y).

The IMF has projected an annual average consumer price inflation of
1.6% for 2021, after a deflation of 1.1% in 2020. The consumer price
index (CPI) is expected to rise also by 1.6% in 2022. According to the
World Bank, consumer price inflation should reach 3.2% in 2021 and
3.3% in 2022.

2.3.4 Industrial production

Bulgaria’s industrial sector was hit by the coronavirus pandemic in
2020, but as the authorities lifted most of the restrictions in the spring of
2021, it started picking up from May.

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