Bulgaria will see stabilization and slow increase of loans at the end of this year and the beginning of 2011, says the latest analysis of UniCredit Group, owner of UniCredit Bulbank.

The loan growth will continue to accelerate in 2010 and become stable at around 11% annual average during the period afterwards, sustained by the recovery of export-oriented production companies and by additional signals about real estate prices, according to UniCredit Bulbank analysts.

“It is yet early to talk about a reverse of the trend over the last several months, but we think that soon the worst with regard to the diminished loan growth will be behind us”, comments Kristophor Pavlov, a Chief Economist with UniCredit Bulbank. In his opinion, the anemic loan growth at present reflects mainly the lack of appetite for new loans.

According to the UniCredit’s economic team even once the crisis is overcome, the loan growth levels will not recover their counterpart values from the years of the economic boom. The latter will reflect the change in the economic growth model based on easy and cheap access to external financing.

"The volatile growth model during the boom years when the economy spent more than was produced at the expense of an increase in foreign debt will be replaced with a more balanced and, respectively, more sustainable growth model in which all components of end demand will contribute positively to the GDP growth”, says Kristophor Pavlov.

UniCredit Bulbank says the growth model of the region will continue to feature external financing but its flow will moderate.

“Our forecast is that after the crisis is through (2012-2015) the annual growth of deposits against the GDP will be an average of 6.5%”, indicates the report.

The economists of UniCredit Bulbank forecast that during the years after the crisis domestic demand will increase by an average of 4.5% p.a., in contrast to an average annual growth of 15.2% during the years of the economic boom.

Domestic demand is expected to bounce back in full and the values from 2008 will be reached again in 2017. Consumer expenses of households will recover fully and reach their levels from before the crisis in 2015, whereas the full recovery of investment – calculated on the basis of gross generation of capital – will require more time and will conclude in 2019.

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