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Private wealth up by 13% yoy despite slowing growth
submited on 20.12.2012 in category Monetary policy | Macroeconomic developments
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Private wealth up by 13% yoy despite slowing growth

Industry Watch distributed among its subscribers the regular report “Personal Assets in Bulgaria: Financial wealth and housing market, Q4 2012”. We present You with the main highlights of the report.

 
 
Although the eurozone is already in recession, and economic growth in Bulgaria slowed down to less than 1% per year, private wealth of the population increased by 13% year over year, reaching BGN 48 billion (€24 billion). 
 
The reason for the rapid increase in financial assets is the ongoing accumulation of precautionary savings and the restraint of large household purchases (clothes, household appliances, consumer electronics) that put an excessive burden on the family budget. Nearly 50% of the increase in financial wealth over the past 12 months is due to the reduced consumption of these goods. 
 
In a slow-growth environment households continue to manage their savings conservatively, investing 69% of the financial wealth in bank deposits. In response to the new tax on income from interest on deposits households will possibly seek more than they did so far other forms of saving, exempt from this tax, including investments in mutual funds and life insurance companies.
 
Toward the end of 2012 the Bulgarian households are inclined save more for the long-term future. The increase in time deposits for the nine months of 2012 was entirely due to the growth of deposits with maturity over six months, while short-term deposits freezed at the 2011 level.
 
Urban housing in the country is worth BGN 140 billion (€70 billion) at market prices at the end of September 2012. Thus, the total (financial and housing) wealth of Bulgarian exceeded BGN 188 billion (€95 billion). 
 
Housing prices are already close to the "bottom", but the potential for growth in the short term is limited due to buyers’ predominantly pessimistic expectations, the still decreasing employment, the anemic growth of mortgage lending and weak inflow of foreign investments into the Bulgarian property market. 
 
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