Financial analysts and credit experts expect the interests on credits to settle and even go down a notch.

Krassen Yotov of Industry Watch said that the interest rates in the eurozone have come down as a result of action taken by the European Central Bank. While the effect of these has so far remained unfelt in Bulgaria, interest rates on credits are expected to go slightly down.

Banks have tightened their requirements for borrowers in respect of own participation, credit history and income stability, and this limits clients' potential, Yotov commented.

Consumer loans are expected to shrink further because they are characterized by greater elasticity and are heavily influenced by the contraction of incomes, while demand for housing loans is stabilizing, according to Industry Watch.

The downward trend in the number of transactions with immoveables observable late last year, is no longer here, Yotov also said. Transactions are concluded at lower price levels and this situation is very much likely to persist.

The chairman of the Association of Credit Consultants, Tihomir Toshev, said that while banks' interest rate levels have not changed dramatically since late 2008, many people have crossed the psychological barrier, accepted having to pay higher interest rates and are back in the banks borrowing more money. This does not necessarily mean that the downturn is over and the immoveables market - and with it credit products - are still searching new price levels to ensure efficient operation, Toshev said. The past few months have seen an increase in bad credits but as

a whole their share remains at a reasonable level and is unlikely to cross the 3-4 per cent mark. Themarket offers various options to borrowers which have short- or long-term troubles repaying their debts, Toshev said.

Private deposits in banks are on the rise while corporate deposits are showing the opposite trend - the need of turnover capital forces businesses to start spending any money they have put aside, Toshev commented. The high interest on credits make businesses cautious when they borrow because a contracted market and slow return on investment makes borrowing a high-risk step.

The programme of the Bulgarian Development Bank for providing credit lines to businesses through commercial banks has been a good step to increase the availability of financial resources for businesses, but it is even more important to ensure unfreezing of any suspended EU funding for Bulgaria, said Toshev.

Bulgarian National Bank (BNB) Vice Governor Tsvetan Manchev said that there has been no dramatism in the dynamics of commercial banks' interest levels in the recent months. Just the opposite, the past couple of months have seen the market settle. According to Manchev, the Bulgarian banking system remains stable and predictable and it was largely due to BNB's prompt reaction that banks were able to adjust to the changes in the environment during the last quarter of 2008.

Manchev said that BNB is ready to continue, if necessary and in dialogue with the banking community and the government, implementing measures to make sure that the Bulgarian banking system continues to perform its usual functions as economic intermediary.

He expects the changed interest rates of the large European central banks and the adjustments in the fiscal policy of the large nations, to affect positively the Bulgarian economy in the second quarter of 2009.

According to Levon Hampartsoumyan, Chairman of the Managing Board of UniCredit Bulbank, Bulgaria will know the downturn is over when inflation returns. Speaking at a workshop on telecommunications held here last week, he said that nobody knows how long the crunch will last and while some see signs that the bottom has been hit and a period of new growth looms on the horizon, that is not at all certain.

Hampartsoumyan believes that Bulgaria is strongly underrated by foreign financial analysts. "Our goal now should be to bring major investors, especially on the backdrop of the strongly pessimistic forecasts for the whole region," he said.

Source: BTA