Bulgarian consumer price inflation went down to 1.4% in June on an annual basis from 1.9% a month earlier, official data showed on Monday.

On a monthly basis the index fell 0.9% in June after decreasing by 0.2% the previous month, driven by a fall in food and soft drinks prices. June is the second month in a row, in which Bulgaria's CPI falls on a monthly basis.

Meanwhile, the harmonized index of consumer prices stood at 2% on a yearly basis in June and was down by 0.4% on a monthly basis.

The figures bear out analysts' view that Bulgaria does not face the risk of stagflation, which is characterized by a falling GDP and increasing inflation rates. Such fears were fueled by the rise in producer prices and consumer price index since the beginning of the year, alongside with the contraction of the Bulgarian economy.

Double-digit inflation and a growing current account deficit have prevented Bulgaria from joining the ERM II, so-called waiting room to the eurozone, since it joined the European Union in 2007.

The center-right government dropped its plans for applying for ERM II after raising the alarm that the 2009 budget gap was 3.7% of gross domestic product rather than the 1.9 % due to unaccounted procurement deals.

Bulgaria's economy contracted by 3.6% on an annual basis in the first quarter of 2010 from 5,9% in the previous quarter, but the government hopes for a 1% economic growth for this year as recovering exports bolster the expansion.

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