Interest rates on corporate loans will fall and banks will actively offer financial resources, predicts the experts of the Bulgarian National Bank (BNB) in their latest Macroeconomic Forecast, published at the end of April. According to the forecast, investments in the private sector will be supported by an increase in final demand for goods and services, lower interest rates, and active lending. However, the expected credit growth may be limited by an uncertain external environment, warns the Central bank.

Market expectations are for further decreases in short-term interest rates in the euro area and on new household loans, with a more significant decline expected in the interest rates on new corporate loans. The reason is that they are more strongly linked to trends in the euro area. In addition to loans, the BNB expects an increase in deposit interest rates.

The growth of lending for corporate clients and households will slow down, and by the end of this year, it will be 12.7% (see the chart). Over the next few years, the BNB expects it to be even weaker. The reasons include less overdraft for firms, slowing private investment, and rising house prices, as well as inflation falling.

According to the latest statistics from the BNB, at the end of March, loans for the non-governmental sector – businesses and households – increased by 14.8% year-on-year, which is a slowdown of 0.5 percentage points compared to February. Total loans granted in Bulgaria amounted to about half of the country’s gross domestic product or around 106.5 billion leva. The change in the size of loans for the non-governmental sector has also been influenced by net sales of loans from other monetary financial institutions, whose volume over the past twelve months has amounted to 135.8 million leva, according to the BNB.

Despite the measures taken by the Central bank, mortgage loans continued to generate strong demand and the largest growth – at the end of March they were up by 26.4% year-on-year. Against this backdrop, consumer loans grew by 14.6% on the year, while corporate loans rose by 9.9%.

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