Bank Lending Dynamics in Bulgaria

Abstract

This paper analyzes factors for the dynamics of bank loans of non-financial firms and households in Bulgaria in the 2008-2012 period. Following a short introduction, credit demand factors are presented and analyzed first, followed by an analysis of general credit dynamics and of credit supply factors. The pre-crisis double-digit growth of bank loans extended to the non-financial companies and households was induced by strong external and internal demand and by enormous capital inflows. In the post-2008 period a process of deleveraging took place, a period of modest lending because of the weakness in demand factors. Namely, poor economic recovery was the main driver of the non-performing loans uptrend, which harmed the credit supply process.