Bulgarians: purchasing power

published on 12/17/09 1:48 PM

Photo: Tania Harizanova

The latest survey of the EU statistical service Eurostat suggests that the citizens of Luxembourg, Ireland and Holland enjoy the highest purchasing power among other EU nations, while Bulgaria and Romania stand at the bottom of the chart. Purchasing power is an artificial unit of measurement indicating the purchase of the same volume of goods and services in different countries. The purchasing power of Bulgarians however has risen since 2006.

Another survey held by the GfK GeoMarketing consulting company suggests that the purchasing power density in Sofia is similar to the average in industrialized countries. The company has drawn up a map that illustrates the purchasing power of the population per sq. km and points to regions whose inhabitants sustain varying extents of purchasing power. The analysis of purchasing power in some parts of Sofia has found that it varies from 5 to 7 mln. euro per km and is quite similar to the indices in Rome, Madrid and in parts of Belgium, Holland and UK.

Based on the findings of the two surveys, we can try to interpret the trends underlying the purchasing power of Bulgarians. In the last 5 to 6 years consumers lived in an unstoppable shopping paradise. Bulgarians had wide access of bank loans to buy not only homes, cars, household appliances and redecoration, but also wedding parties and holiday trips. Figures suggest that one in two Bulgarians has drawn a consumer loan. Experts have termed the Bulgarian recession “a consumer recession” in view of the indebtedness of households and small and medium enterprises. Although the crisis took hold of Bulgaria, Bulgarians went on buying trapped in an unhealthy inertia. The habit of boosting living standards by drawing loans has resulted in growing insolvency. Now this inertia has vanished into thin air. Today consumers think twice before indulging into major expenses. The average Bulgarian has entered the era of saving and elaborate planning of finances is now very common.

Falling consumption has impacted adversely on a wide range of businesses which have started to cut expenses and lay off personnel. Unemployment is up.

What is the situation in the Bulgarian economy? For the first time in 10 years last October Bulgaria entered a period of deflation. Deflation is believed to be even worse than high inflation, because it discourages companies to produce goods, causes unemployment and falling prices. Experts believe that owing to the Christmas shopping spree prices are likely to go up, bringing 2009 inflation to 1.8%. Retailers have been trying to motivate customers through various sales and other promotions.

So far however Bulgarians plan no large-scale shopping whatsoever, though households have not felt the crisis dramatically. The crisis however is around, and the vicious circle of banks racing to give more loans and people buying homes, cars, plasmas and what not, has been broken.

English version Daniela Konstantinova

По публикацията работи: Tania Harizanova

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