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Soaring inflation calls into question peoples’ attitudes to saving

Photo: Ani Petrova

Currently, we are in a period of global economic transformation. New businesses are emerging. Some businesses are changing and Bulgaria is no exception, financial experts contend. In their view, people should continue to save money. However, they should avoid making bank deposits, because this will cost them money in times of high inflation. Bulgarians predicted the high inflation some time ago and hurried up investing their money in real estate properties. Last year, demand for mortgage loans was highest. Although most banks do not pay interest rates on bank deposits, Bulgarians keep more than EUR 32 billion in banks, credit consultant Tihomir Toshev said. In the beginning of 2022, the commercial banks raised fees.

Bank counter services will become more and more expensive, because inflation is surging and the people employed at the bank offices want to receive higher incomes. That is why, costs and rents are rising- credit consultant Tihomir Toshev said for Horizont channel of the BNR. - Banks use financial resource to keep our money. Despite the low interests on bank deposits and the increased demand for credit, all bank loans amount to EUR 14 billion only and the rest of the money is a burden on the commercial banks. Banks introduced fees for big deposits. For instance, if you keep more than EUR 200,000 in deposit, you are to pay a high fee. Unfortunately, most Bulgarians can no longer save money for a rainy day.

“We used to save money in the past and then inflation wiped out all our savings”, people who took part in a poll organized by BNR-Vidin recall. They went back in time when Bulgarians kept all their savings in bank deposits, before the period of hyperinflation and mass bank failures.

“We saved some money to buy a new TV, but inflation wiped out our savings. People should save money for a rainy day. However, we do not have enough money to save, so the topic related to bank deposits is not on the agenda anymore”, a woman from the town of Vidin (Northwestern Bulgaria) said.

Soaring inflation has called into question peoples’ attitudes to saving. According to analysts, Bulgaria’s inflation in the last months of 2021 surpassed the price increase in Western Europe.

Prices of fuels, energy and essential products have risen. This is mainly due to the drastic increase in the price of oil and electricity for non-household consumers, which affected end prices of goods and services. For example, the price of bread and cereals went up by 12.1% last year. Meanwhile, the price of milk and all dairy products increased with 8.1%. The price of animal and vegetable oils and fats increased with 22.7% year on year. Prices of energy, central heating and solid fuel also went up. It turned out that 80% of Bulgarians used most of their savings and cannot save money for extraordinary expenses. According to forecasts, inflation will remain high in the long term. In 2022, the annual inflation is expected to reach 3%-4%.

Compiled by: Gergana Mancheva (interviews by BNR-Horizont and BNR-Vidin)

English version: Kostadin Atanasov

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