site.bta1.9% GDP Growth Forecast for 2015 Can Be Raised, Economist Says

1.9% GDP Growth Forecast for 2015 Can Be Raised, Economist Says

Sofia, May 18 (BTA) - The 1.9 per cent GDP growth forecast for
2015 will perhaps be raised as exports recovered at the
beginning of the year more quickly than expected, Kristofor
Pavlov, chief economist at a commercial bank in Bulgaria, said
in an analysis on Monday.

Pavlov expects that the recovery of the national economy will
become more and more visible in 2015 and 2016. The Bulgarian
banking sector is set to review the quality of its assets, he
said. Some lenders will take action to strengthen their capital
position, while those which find this unnecessary will try to
expand their new-loan portfolios.

The difference between deposit rates and loan rates will remain
unchanged at least until the year's end, Pavlov predicted. At
the same time, both deposit and loan rates will decrease by no
more than half a percentage point annually.

The fall in loan rates will accelerate after the middle of 2016,
 and over the long term there seems to be considerable potential
 for further fall, which implies that the difference between
loan and deposit rates will be getting smaller, he said.

If the central bank manages to get the banking sector to absorb
remaining losses more quickly, and if it becomes more insistent
on stamping out bad lending practices and combating violations
of accountability rules and information disclosure regulations,
it can be expected that bank consolidation will be sped up,
inefficient players will drop out and the banking system will
eventually become more efficient, he said. This should allow a
further drop in the price of bank loans for households and
businesses in the real economy.

The average interest rate on corporate loans will possibly fall
to around 4.50 per cent by the end of 2017 compared with 5.87
per cent in March 2015, Pavlov said. The potential for reducing
interest rates on household loans may be even greater and the
average level may fall to 7.75 per cent at the end of 2017 from
9.30 per cent in March 2015, he added.