site.btaBulgarian Economy Suffered Two Serious Blows in 2014 with Expected Long-term Consequences, Economic Experts Say

Bulgarian Economy Suffered Two Serious Blows in 2014 with Expected Long-term Consequences, Economic Experts Say


Sofia, January 27 (BTA) -  The Bulgarian economy suffered two
serious blows in 2014, the consequences of which will be felt
for a long time, economic analysts from Elana Trading and Saxo
Bank said. The two companies have been publishing joint analyses
 on the development of financial markets for six years now.

The crisis with Russia and Ukraine has already had an impact on
export, while this year it will be felt in the tourism and real
estate markets. The internal problem with Corporate Commercial
Bank (Corpbank) will not only have a negative effect on the
Bulgarian economy, but will be a burden for the State Budget
because of the debt issued to repay the guaranteed deposits in
the bank. According to the analysts, urgent reforms in many
areas are needed to overcome the inherited problems.

The central bank placed Corpbank under special supervision on
June 20, 2014 after a run by depositors left it illiquid, and it
 suspended all operations. The bank's bankruptcy was petitioned
on November 7 after the BNB Governing Council withdrew its
banking licence on November 5. The Bulgarian Deposit Insurance
Fund started repayment of the guaranteed deposits with Corpbank
on December 5. The Bulgarian Deposit Insurance Fund has already
repaid over 3,300 million leva to depositors.

Another important factor, reflected in the report, is that the
lower interest rates in banks are expected to free up financial
resources for companies and households. The data for the first
quarter will show whether this will have a positive impact on
the economy. The stagnation continues for now, because of
households' and companies' refusal to increase consumption or
investments.

The Bulgarian Stock Exchange had the chance to start a new
period of growth in 2015, after the formation of a stable
government and the return of investors' trust in Bulgarian and
European economic growth. The drop of bank deposits' interest
rates and the subsequent demand for higher yield by investors
was a process leading to an expected growth for the stock
exchange. The discussions about restructuring the pension
system, however, pushed away investors from the market at the
end of 2014, which will leave a serious impact on trade
throughout 2015, the analysts added. According to them, if funds
 are not withdrawn from the capital market as a result of
changes in the pension system, the capital will return to the
stock exchange and will push up indexes by some 25-30 per cent.