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The Banking Market in Bulgaria 2006 - CEE Banking SeriesPublished by: Intelace Research Published: Oct. 1, 2006 - 52 Pages Table of Contents
Abstract• Stable growth of the economy. The Bulgarian economy has been growing steady since 2000. The average GDP growth rate remained stable in the 4%-6% p.a. range during 2000-2006 and the initially high unemployment rate dropped below 9% in 2006. High growth of the economy together with a tight budget policy of the government resulted in the impressive budget surplus of over 3% GDP in 2005. The only two problems that could not be solved so far are: relatively high inflation and negative current account balance. The key reason for C/A deficit is growing foreign trade imbalance, caused by exploding internal demand and growing prices of imported resources. Fortunately Bulgaria is able to draw more and more FDIs, which are compensating a big part of the trade deficit• EU accession and reforms. The long expected accession to EU (Jan 1, 2007) is getting closer. Bulgaria has done a big effort to comply with various EU requirements and regulations. Nowadays authorities are already looking ahead to make most of the EU membership. The Parliament has just cut the corporate tax rate to 10% (effective Jan1, 2007), making Bulgaria one of the most attractive places to invest in the whole Europe. It is expected that setting favorable economic conditions will attract new foreign investors and will draw more FDIs, similarly to other countries that have already joined EU: Slovakia, Czech Republic, Baltic etc. Bulgaria is also expected to join ERM II shortly after enlargement as it fulfills most of the convergence criteria. The adoption of EURO is likely in 2010 • Banking market growth. Since the year 2000 banking market is developing quickly, with the annual assets growth rate exceeding 26%. One of the major growth drivers was an explosive lending growth. During 2004/2006 banks lending accelerated dramatically, raising concerns about the overall macroeconomic stability in view of worsening current account, and inefficiency* of traditional monetary policy instruments. The Central bank has reacted in early 2005 with introduction of drastic penalties on excessive lending growth at banks. Applied measures proved to be successful and contributed to moderating 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 increases • Good future prospects. Available banking penetration benchmarks (for example assets per capita: 2400 EUR) indicate that there are still significant growth opportunities laying ahead. In the retail segment further strong growth of mortgage and consumer lending is expected. The use of cash (nowadays cash makes ~43% of retail deposits) is likely to drop and its conversion into deposits and other PFA categories is likely. In the corporate business a significant growth of deposits can be assumed, resulting from reduced taxation Get Full Details About This Report >> |
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