The Banking Market in Bulgaria 2008 - CEE Banking SeriesIntelace ResearchFebruary 1, 2008 51 Pages - SKU: INTL1692950 |
| Countries covered: Bulgaria Continuous growth of the economy. The Bulgarian economy keeps growing steady since 2000. The average GDP growth rate has remained stable during 2000-2007 (in real terms 4 to 6% p.a. ) resulting in doubling of GDP per capita to almost 3600EUR. The initially high unemployment rate dropped below 7% in 2007. High growth of the economy together with a tight budget policy of the government resulted in the budget surplus and impressive reduction of public debt. The major problem that could not be solved so far is persisting inflation and negative current account balance. Fortunately Bulgaria is increasingly attracting high volumes of new FDI, which is compensating the negative foreign trade balance. EU accession and reforms. The long expected accession to EU came true in Jan. 2007. On the way to EU Bulgaria has done a big effort to comply with various EU requirements and regulations. Moreover, to make the country competitive and attractive place to invest, the fiscal policy has been significantly eased, including introduction of low corporate tax rate of 10% (effective 2007), and personal income tax flat rate of 10% (effective 2008), making Bulgaria one of the most attractive places to invest in the whole Europe. As the next step the quick joining of ERM II and adoption of EURO are on agenda. Banking market growth. Since the year 2001 banking market is developing quickly, with the annual assets growth rate exceeding 21%. Moreover since 2004 a surge in both: retail and corporate volumes could be observed. Already in 2005 the Central Bank has addressed acceleration in lending with introduction of penalties on excessive credit growth. Applied measures proved to be successful and contributed to moderating of lending growth. As a side-effect the unsatisfied demand for loans (especially in corporate sector) moved to other financing forms as: leasing, corporate bonds or equity markets. Positive future outlook. Current banking penetration benchmarks (Assets per capita: ~4000 EUR, Assets to GDP:104%) demonstrate that Bulgarian banking market has recently experienced a leap to the league of high growth markets. In our view the future prospects are still very good, although decelerating growth rates are expected starting 2008. In the retail segment we assume further strong growth of consumer lending and mortgage. Also intensive use of cash is likely to drop and convert into deposits and increased use of payment instruments. In the corporate business a continued growth of lending is likely to persist, driven by increasing local investments and FDIs. |
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