The Bulgarian National Bank (BNB) reports growth in the loan portfolio and in non-performing loans in its regular report on the Bulgarian banking system for the first quarter of the year. Loans granted by Bulgarian banks and branches rose by 4.1 per cent, just slightly below the growth recorded at the end of last year. At the same time, gross non-performing loans increased by 7 per cent, whilst their share of the portfolio rose by 0.01 percentage points to 3.3 per cent. Excluding impairment charges, the growth in non-performing loans stood at 6.5 per cent for the quarter, reaching €1.1 billion.
In the first quarter of 2026, the external environment continues to be characterised by a persistently high level of uncertainty, exacerbated by military action in the Middle East and its impact on global energy markets, according to the BNB. Disruptions to supplies and rising energy prices are increasing the risks to economic growth and financial stability, as well as the risk of inflation due to indirect and secondary effects. The BNB notes that in June the European Central Bank (ECB) raised its key interest rates by 25 basis points and did not commit to any forecasts regarding future interest rate movements.
Within Bulgaria, economic growth is driven by private consumption, high employment and a limited labour supply due to unfavourable demographic trends. This is putting pressure on wages to rise, which, combined with high lending activity, is leading to higher consumer spending, according to the BNB’s report. Inflation is expected to rise, with rising fuel prices being an external factor contributing to this. Domestically, rising labour costs and unit labour costs, as well as strong private consumption, are also contributing to price increases.
The BNB notes that labour market conditions and rising incomes, as well as low interest rates, continue to support household demand for mortgages. Growth slowed in the first quarter. According to the supervisory authority, the banking system’s capital position is stable, and all credit institutions meet capital requirements. However, in March the BNB raised the level of the countercyclical capital buffer to 2.25 per cent. The increase will come into effect from the second quarter of 2027. This is one of the few instruments with which the BNB can directly influence the money market and the credit market in Bulgaria, given that membership of the eurozone, and, prior to that, the Currency Board (under which the BNB could also exert influence through minimum reserve requirements, a prerogative of the ECB within the eurozone), do not permit independent direct intervention by the central bank.
