site.btaFinance Ministry's Survey among Financial Intermediaries Shows Economic Stabilization

Finance Ministry's Survey among Financial Intermediaries Shows Economic Stabilization

Sofia, May 16 (BTA) - According to a survey among financial intermediaries, the economic situation in Bulgaria improved in January-March 2016, reads the latest issue of the "Financial Sector: Estimates and Expectations" publication of the Finance Ministry.
     
The publication gives account of the expectations of a large number of financial intermediaries as to the key macroeconomic indicators and factors that are decisive to their operation, such as economic growth, inflation, base interest rate, the Bulgarian lev's exchange rate to the US dollar, and deposit and loan interest rates. 
    
The financial intermediaries' estimate is identical to the improved expectations of the European Commission and the International Monetary Fund for Bulgaria's economic growth in 2016, and corresponds to the positive trends on the labour market and the expectations for an accelerated rate of increase in employment, the Finance Ministry said.

Financial Intermediaries Expect Employment Rate to Continue Increasing

The participants in the survey expect the economic growth rate to speed up in the second quarter of this year, and the deflation to continue slowing down, albeit to a lesser degree. Their forecasts for an accelerated slowing down of the deflation processes in Bulgaria in January-March 2016 did not come true, the analysis reads.

According to financial intermediaries, the employment rate will continue increasing this year.

The base interest rate (BIR) is expected to drop by the end of the second quarter of 2016. It stood at 0.01 per cent in January but dropped to 0.00 per cent in February and remained unchanged until early May. The respondents' expectation can be interpreted as deepening of the negative levels of the interbank market interest rates. The factor behind this are the deposits of households and non-financial enterprises, which continue to flow into the banking system, albeit at a slower rate, against the background of minimal demand for credit resource. The negative interest rates on commercial banks' excess reserves at the Bulgarian National Bank will also have an effect after the new decrease of the reference interest rate in the euro zone in March, the publication reads.

Expectations for Downward Trend in Commercial Banks' Deposit and Loan Interest Rates Remain Unchanged

The respondents keep their expectations for a downward trend in commercial banks' deposit and loan interest rates. However, the financial intermediaries forecast a slower pace of decrease of deposit interest rates in leva and euro, and a quicker drop of the deposit interest rates in US dollars.

The participants in the survey forecast that the price of loans will continue decreasing. As a whole, the financial intermediaries' forecasts for the first quarter of 2016 came true, despite some monthly fluctuations in corporate loans, the analysis reads.
           
Respondents Forecast Slower Increase of Intercompany Indebtedness

The respondents expect a slower increase of intercompany indebtedness in April-June 2016 compared to the previous quarter of the year. Observations show an improvement of the situation in construction, trade and services, with the companies being relatively optimistic about their activity and not expecting problems with their financial state.

An aggravation of the situation and the expectations is observed only in industry, where the financial problems could become more serious, the analysis goes.