
Bread prices in Bulgaria have surged by more than 43% since 2021, defying expectations that the introduction of a zero VAT rate in July 2022 would ease consumer costs.
This stark finding comes from an analysis by the Institute for Social and Trade Union Research at the Confederation of Independent Trade Unions of Bulgaria (CITUB).
The analysis reveals that nearly half of the price increase occurred after the zero VAT exemption was introduced for bread and flour.
The measure, aimed at reducing financial pressure on households, has had only a temporary impact, with bread prices climbing steadily since then.
Bread Inflation Outpaces General Inflation
CITUB’s report underscores the disparity between general inflation and the inflation rate for bread and cereals. Since the beginning of 2021, cumulative inflation, as measured by the consumer price index, stands at 29.9%.
However, the inflation rate for bread and cereals has soared to 43.3%, outpacing general inflation by a significant 13.4 percentage points.
As bread is a staple commodity in Bulgaria, this sharp price rise has disproportionately impacted households, particularly those with limited financial resources.
The union emphasized that general inflation figures fail to capture the full extent of the burden faced by consumers when essential items like bread become increasingly unaffordable.
Short-Lived Impact of Zero VAT
CITUB conducted express surveys to assess the immediate effects of the zero VAT introduction. The surveys revealed that bread prices initially dropped by 1% to 11% following the measure.
However, the price reduction was short-lived, with costs continuing to escalate in subsequent months. This trend has raised concerns about the effectiveness of tax exemptions as a tool to combat inflation for essential goods.
CITUB’s Call for Broader Tax Reform
While acknowledging the challenges posed by rising prices, CITUB clarified that it has never supported increasing VAT on any product. Instead, the union has proposed a more comprehensive approach: reducing the overall VAT rate from 20% to 15%.
CITUB argues that the higher VAT rates, initially introduced as temporary measures during the COVID-19 pandemic, should be rolled back.
With pandemic-related economic conditions no longer present, the union believes it is time for tax policies to return to pre-pandemic levels.
Consumers Struggle Amid Persistent Inflation
The persistent rise in bread prices highlights a critical issue for Bulgarian households grappling with the broader effects of inflation.
For many, bread is more than just a staple—it is a necessity deeply embedded in daily life. The rising costs underscore the limitations of piecemeal measures and the need for a more holistic approach to address inflation’s impact on essential goods.
As Bulgaria continues to navigate these economic challenges, CITUB’s analysis serves as a stark reminder of the importance of sustainable policies to protect consumers from the spiraling costs of basic necessities.