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- Macroeconomic developments
submited on 23.03.2011 in category Monetary policy | Macroeconomic developments
Industry Watch distributed among its subscribers the regular report "Personal assets in Bulgaria: Financial wealth and the housing market, first quarter of 2011" Here are the highlights of the report.
The increase of prices, particularly of food and other necessities, has limited the saving opportunities for Bulgarians. If we take into account the reduced purchasing power of money, it turns out that the growth of financial wealth, measured in goods and services, slowed significantly in the second half of 2010 – to 6 percent year over year. The financial wealth of the population in nominal BGN reached 39.7 billion at the end of 2010
The growth of financial assets is mainly due to rising private pension savings and the increase in bank deposits by BGN 3 billion in 2010, of which BGN 1 billion 200 million were interest income received for the year.
Wealth will grow more slowly over the next few quarters not only because of moderate income growth and appreciation of the consumer basket, but also because of declining yields of the biggest asset of the population - bank deposits.
Bulgarians respond quickly to changes in economic conditions, shifting from short- to long-term deposits, which carry higher interest rates. To keep the value of their savings, some households choose higher-risk instruments such as investments in shares and mutual funds.
The purchasing power of wages measured in residential area increased by over 90% versus the third quarter of 2008, the peak of housing prices. In parallel, mortgage lending continued to grow by 3% annually, which stimulates the natural housing market expansion. Analysis has confirmed the impression that there is a withdrawal of speculative capital from the local property market, both because of drying out capital inflows, and because of household channeling funds to other forms of saving, as evidenced by the rapid growth of bank deposits.
There is some risk of increasing property sales on the secondary market in connection with the restructuring of loan portfolios, which could produce additional pressure on housing prices in the medium term.