- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
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- Macroeconomic developments
Perspectives and risks for the economic growth.
submited on 07.02.2006 in category Fiscal affairs | Monetary policy | Macroeconomic developments
submited on 07.02.2006 in category Fiscal affairs | Monetary policy | Macroeconomic developments
The excessive focus on balance of payments and particularly on current account deficit may render difficult the process of analysis of the current economic conditions and the threats to the growth.
On the one hand, we hold that the official statistics on balance of payments probably overestimates the current account deficit. There are several reasons for such a statement. First, the widespread practices of exporting firms to work with mediators (often based in offshore areas) aiming to underestimate the value of exported goods and to decrease the corporate tax. Second, the official statistics registers large number of Bulgarians traveling abroad as tourists while in fact a substantial part of them actually work and “import” income in the local economy.
On the other hand, the excessive focus on balance of payments obscures other key indicators whose interaction has important implications on the growth forecasts.
The decrease of the ratio of FDI in total financial flow and the growth of financing through external credit in the international context of rising interest rates increases the vulnerability to external shocks. However, we must underline that part of the credit is debt of subsidiary banks to banking groups outside the country aiming to get round the restrictive measures by BNB from early 2005. Alongside the decreasing foreign assets of Bulgarian banks we observe process of growing debt accumulation. By year-end the banks are already net foreign debtors. The previous restrictive role of banking institutions through accumulating capitals from inside and their reallocation abroad had changed and presently the banks are reallocating both local and foreign capitals to the local economy.
Precisely the foreign financing of credit allow us to hold that until now we do not observe real monetary expansion or growth of monetary multiplicator because of credit expansion at stable monetary base.
On the one hand, we hold that the official statistics on balance of payments probably overestimates the current account deficit. There are several reasons for such a statement. First, the widespread practices of exporting firms to work with mediators (often based in offshore areas) aiming to underestimate the value of exported goods and to decrease the corporate tax. Second, the official statistics registers large number of Bulgarians traveling abroad as tourists while in fact a substantial part of them actually work and “import” income in the local economy.
On the other hand, the excessive focus on balance of payments obscures other key indicators whose interaction has important implications on the growth forecasts.
The decrease of the ratio of FDI in total financial flow and the growth of financing through external credit in the international context of rising interest rates increases the vulnerability to external shocks. However, we must underline that part of the credit is debt of subsidiary banks to banking groups outside the country aiming to get round the restrictive measures by BNB from early 2005. Alongside the decreasing foreign assets of Bulgarian banks we observe process of growing debt accumulation. By year-end the banks are already net foreign debtors. The previous restrictive role of banking institutions through accumulating capitals from inside and their reallocation abroad had changed and presently the banks are reallocating both local and foreign capitals to the local economy.
Precisely the foreign financing of credit allow us to hold that until now we do not observe real monetary expansion or growth of monetary multiplicator because of credit expansion at stable monetary base.
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