site.btaBulgaria 2015 Growth Will Be Slowed Down by Corpbank Collapse - Raiffeisenbank Analysis

Bulgaria 2015 Growth Will Be Slowed Down by Corpbank Collapse - Raiffeisenbank Analysis


Sofia, December 17 (BTA) - Growth in Bulgaria will be slowed
down in 2015 due to the collapse of Corporate Commercial Bank
(Corpbank), while Central Europe will be on the fast track of
its economic development, a report of Raiffeisenbank concludes.
The paper, prepared by one of the largest commercial banks
operating in the EU is focused on the development of the
countries in Central and Eastern Europe in the first quarter of
2015.

The picture in Central and Eastern Europe (CEE) continues to be
different in the individual regions, with Central Europe
outstripping the rest, the report finds. GDP growth expectancy
for 2015 includes 3.5 per cent for Poland, 2.5 per cent for
Slovakia, 2.4 per cent for the Czech Republic, 2.3 per cent for
Hungary and even 2 per cent for Slovenia. Romania is definitive
in SE Europe with 2.7 per cent, while stagnation remains for
most of the countries in the region, such as Serbia and Croatia.

Peter Brezinschek, Head of Raiffeisen Research of Raiffeisen
Bank, points out that Central Europe is on the fast track - a
development which has been observed over the last few quarters.
Growth in the region is mainly due to domestic demand, which
protects the countries from the present situation in the
euro-zone and Russia, he thinks.

In Bulgaria, the new pro-European and pro-Atlantic government
has inherited an enormous budget deficit of 3.7 per cent of GDP,
 which will be covered by an additional 2,300 million euro
public debt, the report says. Although the government is
supported by a broad coalition of parties, it will probably
remain in power for at least a year because both the people and
the parties are not convinced of the benefit of new elections
and do not believe they would change anything. According to the
analysts, if the government demonstrates a serious commitment
for open governance and solution of real economic and social
problems it could serve its full term.

In the third quarter the real GDP of Bulgaria has increased by
0.4 per cent q/q and by 1.5 per cent compared to the same
quarter in 2013. End consumption in Bulgaria has slowed down to
0.8 per cent annual growth, compensated by a sustainable growth
at the formation of base capital. A 1.4 per cent annual growth
for 2014 still seems achievable for 2014, based on domestic
demand and base capital formation, the analysts think.

The financial misbalance, accumulated from the collapse of
Corpbank, the fourth largest bank in Bulgaria, will slow down
growth in 2015, which is expected to reach 1.2 per cent,
Raiffeisenbank Bulgaria analyst Emil Kalchev said. What he
thinks is positive is that the problems in the banking system
have remained isolated cases and have not had an impact on the
currency board or the stability of the banking sector. The board
 is stable because foreign currency coverage of the reserves 
amounted to 175.5 per cent (in October) at required 100 per
cent.

The bank analysis finds a growth of credit extension in Bulgaria
 in annual terms, with expectations that it will continue not
only through the first quarter of 2015 because of the forecast
gradual decline of interest and the considerable liquidity in
the sector.