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Experts in economy on 2015: unstable business environment and state capitalism

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The collapse of the third largest bank in Bulgaria, the Corporate Commercial Bank, the increasing foreign debt of this country and also the lowering of the long- and short-term foreign and local currency sovereign credit ratings of it to 'BB+/B' by the Standard & Poor’s – this is the heavy economic heritage that will be the burden of our economy in 2015 too.

According to economy expert Ilian Vassilev Budget 2015 has fallen hostage to the political goal of fortifying the unstable government, but at the expense of reforms. The bank system is the most affected sector, which is a basic one for the economy. CCB bankrupted as a result of regulations’ tightening, which led to an impairment of its portfolio, but the problems in the banking sector remain.

On the other hand, consolidation or unification may be expected after the sudden crisis in the bank sector, or at least that is what past experience shows. However, this is something desirable, but unlikely to happen:

“Due to the policy of the Central Bank /BNB/ other banks do not feel any pressure to get consolidated, to react to market trends and it seems that as a result the banking system has torn itself apart from the economy. We see a growing volume of deposits and a decreasing one of loans. This is very dangerous, since the bank system closes itself within the frameworks of its own self-reproduction and self-sufficiency. Unfortunately neither the government, nor the BNB register this problem.”

The isolation of the banking sector here will be broken by the liberal policy of the European Central Bank, which reduced end-2014 deposit interests, as the effect from this policy is gradually making its way here as well. Interests in 2015 are expected to continue going down, which will lead to lower returns on deposits and lower interests on loans. The expectations are for some movement in the company loan segment, as well as on the real estate market.

Bulgarian firms protect themselves mainly via export, due to the unstable business environment, with all the changing and controversial economic policies and regulations. One sector, expected to continue generating an export growth in 2015 as well, is the final products industry or of the ones, included in the production chain. The so-called outsourcing marks a growth too.

“In 2014 we witnessed more serious movement of employment and expectations for investments in 2015”, Petar Ganev from the Institute for Market Economics contends. “That was the common ground in the middle and through the second half of 2014, after a political instability in the regions with growth and competitive enterprises. There are quite a lot of regions with no visible restoration, especially to the North, so business there shows a somewhat more negative attitude.”

However, foreign capitals, entering this country’s economy mark a drop. It is grounded on the double standard of Bulgarian politicians, which will obviously continue to act in 2015 as well. On one hand the authorities are convinced that foreign capitals bring life into the economy, but on the other the populist idea is proclaimed on foreign investors taking out our national wealth. Thus a sort of a state capitalism if being fed, according to Vassilev, where a series of businesses depend on state procurements, which are considered to be the right investments, along with EU funds. However, such a view covers schemes for corruption, scaring away foreign and Bulgarian investors.

“These people (businessmen, close to the government – editor’s note) have some really high influence, as far as authorities are concerned”, Ilian Vassilev goes on to say. “Being aware of their impotence and lack of future, those hold the liberalization of the market and the state’s relieving of corruption. These people are extremely dangerous and steal so much wealth and added value from our development. Thus we cannot move from the last position…”

There is no signal or positive news on a possible upward trend of Bulgaria’s rating and analysts see that as a major issue. Despite all this, having been prepared for a long time, strategic investments of certain companies might take place.

English version: Zhivko Stanchev


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