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The crisis is still raging in full force

The situation of households in Bulgaria is still severe in terms of employment and income, shows a Institute for Market Economics' analysis

3E news
06-06-2011 02:37:18
The National Statistical Institute (NSI) continues to show new data, which has little to do with the government's view on the economic situation in our country. Not that it bothers the government. In fact it is much more likely for the state to challenge Institute's data than to accept reality. Some cabinet ministers and the Prime Minister Borissov himself live in a parallel world which is characterized by another "reality". In this world the crisis is over. But is that true?



For a person of working age the most direct evidence that the situation is actually improving, is for him/her to have a job with an increasing income. This person cares little about the GDP's jump or rising exports if he/she is unemployed or with frozen benefits. The income is important also for other groups such as pensioners, self-employed, landlords, etc. They all expect their earnings to rise with the economic revival.



At the beginning of this week Eurostat and NSI reported new data that shows that there is still crisis in Bulgaria in terms of jobs and income. According to Eurostat in April 2011 the unemployment rate in Bulgaria is 11.4 percent (seasonally-adjusted data), which puts us in the group of countries with the highest increase in unemployment for the last year (along with Greece, Lithuania and Ireland).



For the last half year Eurostat reported almost unchanged unemployment levels in Bulgaria (11.4 to 11.5%). Even more worrisome is the fact that the percentage of long-term unemployed and discouraged workers has increased severely over the past year, according to NSI in its monitoring of the workforce for the first quarter of 2011, released last week. At the same time the social ministry insists that their data is correct and unemployment is not as the one reported by NSI and Eurostat, and is "only" about 9%.



On top of the unenviable position in the labor market is the ongoing income contraction. According to current NSI data the average income per household in the country decreased in nominal terms in the first quarter of 2011 by 2.9% (and much more in real terms, ie taking into account inflation) over the same period last year. Minimum wage growth (0.5 percent) and pensions (1.7 percent), which form over 85% of the total income was insufficient to offset the decline in other sources of income. At the same time households have used their savings to cover rising costs and to a much lesser extent relied on social assistance and benefits as a source of income.



Because of higher food costs (due to higher international and domestic prices of basic foods) as well as taxes and social security, households were forced to cut all of their other costs. But if there are objective reasons to explain the increase in food prices, the same cannot be said for taxes.



The statistical data showed that in the first quarter of 2011 households have reduced spending on residential furniture and home support (-21.8%), alcohol and tobacco (-10.7%) clothing and footwear (-7.1%), health (-8.5 percent), transport and communications (-3.3%), etc. The deposits have fallen by 75.3%.



It is evident that in households the crisis is still raging in full force. It will require at least another few months before growth of exports and economy will be felt by the citizens through higher employment and income. Until then the ministers quoting whatever data shall be of little relevance to the consumers.

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