Bulgarians’ household savings will continue to grow this year, albeit at a slower rate than in 2012, UniCredit Bulbank said in forecast on January 3.
“To some extent, the introduction of the tax on term deposit interest income will have an impact, but this tax is unlikely to result in a serious loss of interest from households, because [such deposits] remain the most safe and relatively profitable savings option,” UniCredit Bulbank marketing director Ekaterina Kirilova said.
Interest rates on deposits were expected to continue declining in 2013, with the only notable exception being intermittent promotional rates offered by financial institutions, but such a decline was unlikely to be drastic, rather a return to the interest rates offered before the global financial crisis.
The credit crunch resulted in a brief period in Bulgaria, in 2009 and part of 2010, when banks offered high interest rates on deposits in an effort to shore up their liquidity. With their liquidity well above European Union and local regulatory requirements, Bulgarian banks have since reduced interest rates, but that has not diminished household savings – with the economy still in the throes of slow recovery and double-digit unemployment, household consumption growth has been slow.
“Given the economic situation in the country and the world, the caution showed by households concerning riskier saving solutions and investments is logical. As a whole, deposits remain the dominant choice for short- and medium-term savings, reaching a record 33.36 billion leva at the end of October,” Kirilova said.
Deposits grew by eight per cent in the first 10 months of last year and 12.7 per cent year-on-year as of end-October, she said.
The bulk of deposits, about 75 per cent, were for amounts up to 1000 leva, however, and only 625 deposits in excess of one million leva were logged by Bulgarian National Bank.
The growth in long-term deposits was a result of better interest rates offered by banks, but also a sign that Bulgarians were unwilling to resume spending big on consumption in the coming months, Kirilova said.
(Photo: Clive Leviev-Sawyer)