BAS scientists: Banks extend credits to sectors that do not generate economic growth

“Commercial Banks in Bulgaria are extending credits to sectors with quick returns on investment but not addressing predominantly high-tech industries and the generation of economic growth. Such sectors are trade and repairs, construction and real estate, whose share in the structure of corporate loans is 30%, 18% and 15%, respectively,” said Senior Assistant Professor Dr. Grigor Sariyski of the Economic Research Institute at the Bulgarian Academy of Sciences (BAS) during the international scientific conference on the post-crisis economic development of the EU and Bulgaria. In his analysis of banking as a factor of economic growth, Dr. Sariyski stressed that we will not recover from the crisis soon if this trend persists because money will go to sectors where there is quick return but profits and wages grow slowly. His thesis was supported by Prof. Iskra Beleva, according to whom, the structure of loans corresponds to that of employment. “The jobs mostly sought now are those connected with trade and services - shop-assistants and consultants – and this does not suggest long-term economic growth,” she stressed.

The international conference held today and tomorrow is organised by the Economic Research Institute at BAS and focuses on four main problems: the financial and sovereign debt crisis, economic growth, innovation and investment, labour market and social policy, and labour mobility. The event is being attended by Bulgarian and foreign researchers, lecturers and experts. According to Professor Garabed Minasyan, the central problem now is why the money is diverted and how to make it work in order to achieve stable and long-term economic growth. He pointed to the following parameters of the financial and economic vulnerability of Bulgaria: the negative fiscal account due to the export of own and not foreign capital, the contraction in the investment activity by nearly 40% over the last three years, the reduction in private consumption by 8.1% and the accumulation of social tension in society due to unemployment and poverty. “I believe that financial stability is illusory without economic stability,” said Professor Minasyan and recommended vigorous measures on the part of the Government for maintaining order, discipline, transparency and predictability.

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