Year-on-year inflation in Bulgaria rose to a new 10-year high of 15.3 per cent in June, despite prices decreasing by 0.2 per cent for the month, preliminary data released by the National Statistical Institute (NSI) on July 14 2008 showed.

The year-on-year figure increased because deflation in June 2007 was 0.4 per cent, according to NSI data.

Food prices, which have been the main driver of inflation since April 2007, fell by 2.1 per cent in June, the second straight month of decrease after a 0.3 per cent drop in May. The decrease of prices of foodstuffs and beverages was the main reason for deflation in June, NSI said in a statement.

Non-food goods were 1.3 per cent higher and services went up by 0.8 per cent.

Harmonised inflation, the figure calculated by the statistics board for comparison with inflation in the European Union, was up 0.5 per cent in June and 14.7 per cent year-on-year, compared with 0.9 per cent for the month and 13.9 per cent year-on-year in May. The main driver of growth was the increase in transport prices, NSI said.

The Cabinet targets reducing harmonised inflation figure to 4.5 per cent for the year, according to the macroeconomic framework used to draft the 2008 budget. Bulgarian National Bank said in its quarterly review on July 10 that it expected year-on-year inflation to go down in the second half of the year and reach eight per cent by end-2008.

The European Commission was less optimistic in its own forecast and expects end-year inflation to be 9.9 per cent. An analyst poll carried out by Industry Watch think-tank in Sofia earlier in July produced an average figure of 9.6 per cent.

Inflation is expected to jump in July, when electricity, heating, gas and train ticket price increases go into effect.