Purchasing power of Bulgarians – EU comparative study

Why is the lifestyle of the average Bulgarian different from the one of the average European? Experts from the prestigious GfK institute have estimated that the purchasing power of the Bulgarians is EUR 2,681 per capita, while for the rest of the EU it is EUR 14,202. A 2% raising of consumption has been registered throughout the member-states, despite the heavy economic and financial crisis. However, the trends in this country are vice-versa. Consumption in Bulgaria has dropped by nearly 8%. Lichtenstein has been marked as the state with the best standard of living and the purchasing power of its population has been estimated to some EUR 50,000, the survey results say. Switzerland and Luxembourg are also among top three in the list. It is difficult for Bulgaria to compete with the leaders in the rankings that have their long years of free market traditions. This country is ranked barely 37th for the whole of Europe.

As we talk about a drop in consumption we have to say that Bulgaria is the only country that registers a decreasing of the internal demand of goods and services. The situation is similar in the states with developed economy – Lichtenstein, Switzerland, Germany, Italy, Spain and also the new member-states – Romania, Lithuania, Latvia and Slovakia. The surveys of the GfK institute are not much different from the analyses of the European statistical institute. According to Eurostat data, the average Bulgarian receives less than a half from the average European’s income.

Eurostat’s further statistics may calm down the Bulgarian citizens. They show that traditionally this country takes one of the top positions within the EU, as far as the lowest prices of foods and drinks are concerned. They are some 53% from the average price level for the community. Thus the low incomes of the population are somehow balanced. Statistics says that the prices of bread, meat, cigarettes and alcohol are lowest, compared to the other EU member-states. Despite that fact, the prices in Bulgaria are slowly, but constantly increasing and Eurostat expects an inflation of 2-3% for 2010.

What are the consequences for this state’s economy from the poor purchasing ability of the Bulgarians? First, the growth of internal consumption is slowed down this way, which leads to a vicious circle. The more shrunk consumption, the worse business situation, since businesses cannot sell their production on the market this way. Then entrepreneurs are forced to shrink their expenses and reduce the number of employees. The decreased incomes of the population then affect again the consumer goods. They remain at shops and stores for a long time, traders have to cut prices to the maximum and producers are forced to shrink their production. Thus we get back to the beginning of the vicious circle. Besides that, the prices of some goods and services start to go up within the shrunk demand with the purpose of investments’ return. That is how a second circle is born that leads to inflation. Fear of the future is another major indicator for the poor purchasing ability of the Bulgarians. Insecurity and lack of trust also increase the citizens’ savings. The saying goes like this: “What is sure is sure”. The record number of deposit millionaires for the past year in Bulgaria has only confirmed that wisdom.