Expected impact of the COVID-19 pandemic: Financial sector in Bulgaria

Date created: 06-Apr-2020

Measures to curb the spread of COVID-19 are growing into a large-scale real sector crisis virtually worldwide. Our expectations for the decline of the Bulgarian economy in 2020 range in 2-10% between optimistic and pessimistic scenarios. The government has set a pessimistic scenario for a 3% decline in GDP this year when updating the state budget.

A number of economic sectors will face payment disruptions and receivables cycle extension. We expect delays in debt obligations service to grow along with the duration of the crisis unless forbearance is elongated. Job losses, especially in the services sector as well as in some of the manufacturing sub-sectors, will increase. Shrinking incomes will also lead to limited consumption, some increase in defaults on households’ loans, and could enhance the risk for financial institutions. We expect a serious impact on the cash flows of both individuals and legal entities.

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