An inflation increase in Bulgaria over the past months was a result of the world's economy inflation situation, rather than from poor crops and domestic factors.

Focus news agency quoted Industry Watch (IW) expert Georgi Stoev as saying that Bulgaria's inflation in 2007 is lower than 2006, when it was 7.3 per cent. Inflation for the period from January to July 2007 was 5.4 per cent compared to the same period of 2006.

Stoev said that current situation of world's economy and the euro devaluation affected inflation in Bulgaria.

He said that taxes should be reduced, notwithstanding high inflation. Tax reform would work best if it was combined with lower social security instalments.

Employers would not report on undeclared income only because of a ten per cent flat tax, Stoev said. This was the main problem of Bulgarian economic and fiscal policy, he said.