site.btaBankers in Bulgaria Do Not Expect Increase in Problem Loans

Bankers in Bulgaria do not expect an increase in problem loans, unlike in other Eastern European countries, according to a survey by Ernst & Young in Sofia. Almost half of bankers (47%) expect an increase in restructured bank loans.

The data is for more than 20 countries, including Bulgaria, and reflects both what has happened in the market so far and long-term trends. According to the surveyed financial specialists, the situation will calm down early next year and especially in the second half of 2025. However, the data for this country does not match the others - in Bulgaria, bankers are rather optimistic and do not see an increase in problem loans coming. 

The main reasons for the worrying trend reported by bankers are rising costs for companies, reduced demand in certain industries and interest rate levels that remain high. Construction, agriculture and real estate emerged as the sectors reporting the strongest loan restructuring activity, followed by manufacturing and retail, the company's analysis said.

The construction sector remains on top due to high inflation, which increases the prices of materials, energy and labour, the consultancy also reported. At the same time, the industry is also under pressure from high interest rates and fluctuations in demand in some European countries. The agricultural sector, for its part, remains squeezed by the war in Ukraine and is also suffering from high fuel, fertiliser and energy prices. Production, in turn, depends on the harvest, and the hot weather of the last two years has led to poor results and a forecast of problems at the end of the year. The real estate sector continues to be perceived as particularly volatile - on the one hand there is the reduced demand in some of the Central and Eastern European countries and on the other there is the expectation that the price bubble will burst and lead to turmoil. 

The EY survey reflects the observations of bankers involved in the management of distressed loans from the largest banking institutions in more than 20 countries in Central, Eastern and South-Eastern Europe, including Bulgaria. It gathers their views on trends in loan restructuring, solutions implemented and future expectations. The data covers the period from the second half of 2023 to the forecasts for the first part of 2025.