October surprise? Rising prices could impact Bulgarian political situation

Written by on September 12, 2018 in Perspectives - Comments Off on October surprise? Rising prices could impact Bulgarian political situation

Bulgarian Prime Minister Boiko Borissov and his Finance Minister Vladislav Goranov have grabbed the headlines by pledging a 10 per cent increase in pay for public service employees in 2019, a pledge that skeptics immediately linked to expectations of higher consumer prices if, as some forecast, natural gas prices rise in October – and said was promised with an eye on next year’s elections.

Bulgaria is scheduled to vote in two elections in 2019, for the European Parliament on May 26 and for municipal councils and mayors in the autumn.

On September 12, Goranov denied that the pay increase was linked to elections: “There are elections every year,” he said.

The recent political melodrama within Bulgaria’s ruling coalition apparently has passed, for the moment, after fuelling renewed speculation about early parliamentary elections, of which the country has seen a succession in recent years.

There have been a number of high-profile controversies in Bulgaria in 2018 – the proposed sale of energy distributor CEZ to a hitherto-unknown Bulgarian company, the collapse of a major motor vehicle insurer, the strange saga of the Trade Register website going offline for several days, among others.

No reliable polls have emerged recently about the respectively popularity or otherwise of Bulgaria’s politicians, but one of the less reliable ones suggested on September 12 that Borissov’s popularity had been significantly knocked by recent events, including the Svoge bus crash in late August, in which 17 people died in the worst such bus accident for a decade.

That crash led, in turn, to questions about the state of Bulgaria’s roads, as earlier, inspections had been ordered of major bridges in the light of the Genoa bridge disaster. Infrastructure has been a signature issue for Borissov for years – the opening of even the shortest stretches of motorway, newly-built or repaired, do not fail to feature a photo op with the Prime Minister.

But even that poll still showed Borissov with a reasonable lead over the next-largest party, the opposition Bulgarian Socialist Party, which under its latest leader, Kornelia Ninova, has achieved no significant growth. The party launched a “Vision for Bulgaria” which inspired no public excitement, and beyond that, has merely been throwing out calls for individual ministers or the entire government to resign, doing so with the regularity of a machine that throws tennis balls, only to see them bounce haphazardly or be slammed back.

The BSP, of course, cannot be entirely dismissed as a threat to the possibility of a fourth Borissov government, in the hypothetical event of early parliamentary elections, given that Ninova’s party may seek to forge an anti-Borissov coalition. In such a scenario, its most likely partner would be the Movement for Rights and Freedoms, for all the conventional wisdom that it may not want to repeat the debacle that was the 2013/14 “Oresharski” government.

These high political abstracts beside, one of the few issues sufficiently tangible to bring out public discontent is cost of living. Precisely that issue was used to mobilise people in February 2013 against the first Borissov government.

In the Bulgarian-language media, there have been frequent references to the expected, if not confirmed by the regulator through a formal decision, increase in the natural gas price. Television stations and websites have no trouble finding talking heads to expound on the topic.

An example is a recent interview given by economist Professor Dimitar Ivanov to television station bTV, one of Bulgaria’s most-watched channels and thus of some influence on public opinion. It is a truism that a message merely being in the media may have influence, irrespective of the merit of the content.

According to Ivanov, formerly an adviser to then-president and former BSP leader Georgi Purvanov, an increase in gas prices will result in an “avalanche” of increases in all prices of basic goods and commodities – food, heating and transport, among them. This meant, he said, that the Bulgarian economic and social autumn would not be easy.

Bulgarian-language media also gave prominent coverage in recent day to the views of the Confederation of Independent Trade Unions in Bulgaria, which said that the new prices of gas, electricity and heating (as noted, it was basing these views on expectations rather than formal decisions, in all cases) that would push up cost of living by seven leva a person in a four-person household.

According to the confederation, the most affected by the rise in cost of living would be people in Sofia, the capital and Bulgaria’s most-populated city, where more than two-thirds of dwellings rely on central heating. An average household in the city would be paying about 11 leva more a month for heating this coming winter, adding up to something close to 60 leva over the heating season.

That may not sound like much, but the confederation cited Eurostat figures that in 2017, close to 37 per cent of Bulgarians could not afford to heat their homes. Adding in the large number of people in Bulgaria below the poverty line, and even a minor increase in living costs would shrink consumption, worsening poverty and social exclusion.

Another talking point has been the bread price, along with various media reports referring to fruit and vegetable prices. The rainy summer of 2018 has hit several crops hard, from wheat to grapes and other harvests. It is notable that Agriculture Minister Roumen Porozhanov has insisted that in spite of this situation, there is no basis for expecting bread shortages or drastic price rises. This is in the face of reports claiming that bread is going to be more expensive, not only because of more expensive wheat, but also, again, because of the purported expected rise in the natural gas price.

If attacked on the economic front, Borissov has positive indicators to point to. Statistics for the last four months of 2017 pointed to sustained growth of the economy, by about 3.6 per cent, an increased employment rate and concomitant reduced unemployment (for many months, Bulgaria has been notably below the EU unemployment average and almost every month sees a further decrease, a trend that is expected to continue to the point statisticians regard as “full employment”). In turn, households have higher purchasing power, and domestic consumption has risen, a key driver of the economy.

At the same time, however, after more than two years of deflation, Bulgaria has seen inflation.

As The Sofia Globe reported, Bulgaria’s annual consumer price index (CPI) recorded 3.5 per cent inflation in July, up 0.3 percentage points compared to a month earlier, as well as 0.7 per cent inflation on a monthly basis, according to data released by the National Statistical Institute (NSI) on August 14.

The annual CPI inflation figure hit its highest since February 2013 (when it was 3.6 per cent), the latest sign yet that Bulgaria’s economy has shrugged off years of deflationary pressure. In monthly terms, consumer prices recorded a decrease only once in the previous 12 months, in March.

It appears that this inflation is being driven by domestic and external factors, including the growing purchasing power of Bulgarians but also the rising prices of fuels.

At the same time, the economic growth rate has slowed, to about 3.4 per cent on an annual basis in the second quarter of 2018. This is the lowest since 2015, well below the kind of rate needed to significantly boost the country’s economy closer to the levels of the more affluent part of the EU. In context, the figure is still above that of the EU as a whole, even if Bulgaria’s figure is the lowest in three years, but it falls short of what is needed for Bulgaria to catch up with the rest of the EU.

According to Eurostat, consumer prices in Bulgaria are but 44 per cent of the EU average, but this cannot be noted without swiftly adding that salaries and wages remain five to seven times below the average for the bloc. In turn, purchasing power in Bulgaria is about 60 per cent of the EU average.

All of this makes Bulgarians price-sensitive.

There are a number of other factors that could impact the cost of living in Bulgaria, the Rumsfeldian “unknown unknowns”. For instance, should the government fail to contain the spread of African Swine Fever, this could have an impact on pork prices. Pork is the most widely-produced and consumed meat in Bulgaria, and accounts for about 80 per cent of the country’s total meat production.

Already, ovine rinderpest in Bulgaria earlier in 2018 became a political football, complete with – discredited – conspiracy theories that there was no such outbreak and that it was a diabolical plot to clear an area of the country to make place for migrants. The opposition BSP fell on the chance to try to discredit Borissov’s government and its handling of the outbreaks.

Whether or not early parliamentary elections are on the distant horizon, there will be a long run-up to the European Parliament elections in May, and moreover, the elections that Bulgaria’s political parties really care about, the battle for control of the countries cities, towns and villages next autumn.

Mindful of recent memory that Bulgarians can be mobilised around cost-of-living issues, Borissov’s rivals may seek to do so. Borissov may try to rely on a riff of the 1957 message from Harold MacMillan: “Most of our people have never had it so good”.

Less-quoted, but still relevant, was MacMillan’s next line: “Go around the country, go to the industrial towns, go to the farms and you will see a state of prosperity such as we have never had in my lifetime – nor indeed in the history of this country.”

Borissov may try the same message, but would have to be very persuasive, to audiences of Bulgarians for whom every lev and every stotinka counts. He might also remember – in a Bulgaria that officially seeks to join the euro zone and thus must tamp down inflation – that it was just a few years after this quote that MacMillan put in place unpopular measures to try to curb inflation; and that cost him his place as prime minister.

(Photo: Clive Leviev-Sawyer)

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About the Author

Clive Leviev-Sawyer is the Publisher and Editor-in-Chief of The Sofia Globe. He is the author of the book Bulgaria: Politics and Protests in the 21st Century (Riva Publishers, 2015), and co-author of the book Bulgarian Jews: Living History (The Organization of the Jews in Bulgaria 'Shalom', 2018). He is also the author of Power: A Political Novel, available via amazon.com