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Risks before the financial health of Bulgarian households
submited on 03.10.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 03.10.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
Theoretically examined, upward price dynamics, combined with rising cost of the credit resource could in begin to reflect unfavorably on the household financial wealth – in other words, on their ability to service their current debt and on their marginal propensity to take on more credit.
Although the monetary statistics has in recent months reported slight deceleration of the rate, at which bank credit for households is extended, loans continue to expand faster than growth of the disposable income and financial assets. The credit coverage ratio keeps on deteriorating, despite that households remain net creditor to the banking system.
Certainly the growth of the above-mentioned ratios must not be necessarily viewed as signal for financial stress. Probably the rising financial leverage reflects the improving financial infrastructure and/or financial flexibility, without serious deterioration of risk. There is also the probability that the household income or financial assets are underestimated, due to statistical imperfections.
We must take also into account the impact of the conjuncture on the international financial markets. The reflections is rather indirect and is notable mainly in the increasing cost of financing.
Meanwhile, despite that in recent months there is slight deterioration, the share of bad credit in the banks’ credit portfolio remained relatively small.
After all, the upward trend in the ratios, measuring the relative debt burden of households, signals that they could potentially meet credit restrictions – larger portion of their income will be reallocated toward servicing the liabilities, which could limit the opportunities for additional credit in the future.
The easing of liquidity constraints of households and the increasing indebtedness imply that their consumption (and the economy as a whole) will probably become more sensible to changes in income (employment respectively), the prices of real estate and interest rates. There is however small probability for us to witness sharp deterioration of the household financial health.
Although the monetary statistics has in recent months reported slight deceleration of the rate, at which bank credit for households is extended, loans continue to expand faster than growth of the disposable income and financial assets. The credit coverage ratio keeps on deteriorating, despite that households remain net creditor to the banking system.
Certainly the growth of the above-mentioned ratios must not be necessarily viewed as signal for financial stress. Probably the rising financial leverage reflects the improving financial infrastructure and/or financial flexibility, without serious deterioration of risk. There is also the probability that the household income or financial assets are underestimated, due to statistical imperfections.
We must take also into account the impact of the conjuncture on the international financial markets. The reflections is rather indirect and is notable mainly in the increasing cost of financing.
Meanwhile, despite that in recent months there is slight deterioration, the share of bad credit in the banks’ credit portfolio remained relatively small.
After all, the upward trend in the ratios, measuring the relative debt burden of households, signals that they could potentially meet credit restrictions – larger portion of their income will be reallocated toward servicing the liabilities, which could limit the opportunities for additional credit in the future.
The easing of liquidity constraints of households and the increasing indebtedness imply that their consumption (and the economy as a whole) will probably become more sensible to changes in income (employment respectively), the prices of real estate and interest rates. There is however small probability for us to witness sharp deterioration of the household financial health.
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