Raiffeisenbank: Bad credits will decline if the economy grows

“The decline in bad credits, registered by the Bulgarian National Bank (BNB) at the end of last year, is mainly a result of writing off loans from banks’ balance sheets,” Kaloyan Ganev, Chief Economist of Raiffeisenbank, commented on the data in the bank’s monthly economic analysis. Macroeconomists quote BNB’s data, according to which the share of bad credits decreased to 16.62% at the end of Q4 2012, compared to 17.25% at the end of Q3 2012. According to Ganev, “there is no change in the economic situation requiring a steady decrease in the amount of bad loans”. This may happen only after the country’s economy starts to register a significant growth and when the employment rate begins to recover.

“Our forecast for GDP growth of 1.5% in 2013 means that we are still far from such a development,” explained Ganev. The rising prices of goods and services have been pointed to as the main reasons for the reported 4.2% inflation rate at the end of 2012.

On the basis of NSI’s data, Raiffeisenbank’s analysts reported a persistent decline in industrial production in November (-1.8% year-on-year) and a drop in internal trade (-7.4%, compared to November 2011). Meanwhile, construction output continued to increase at an annual growth rate of 1.1%.

According to the analysis of Raiffeisenbank, the labour market is among the main problem areas of Bulgaria’s economy, the unemployment rate standing at 12.5% at the end of last year. The financial institution reported a significantly better budget implementation than expected, the 2012 budget deficit standing at 0.5%, down from the 1.3% deficit projected in the 2012 Budget Act.

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