3rd Bank of Greece Workshop on
the Economies of Eastern European and
Mediterranean Countries
Athens, May 18th 2012
The Impact of the Greek Sovereign Debt Crisis.
Country view – Bulgaria.
Mariella Nenova
Economic Research and Forecasting Department, Bulgarian National Bank
Българска народна банка
Bulgarian National Bank
Outline
•
Economic and financial links between Greece and
Bulgaria:
•
Developments during the global economic crisis
and current trends
•
Conclusions
2
Българска народна банка
Bulgarian National Bank
GDP Growth by Components
Growth rate in %
GDP
Private consumption
Public consumption
Gross fixed capital formation
Exports of goods and services
Imports of goods and services
BULGARIA
2009
2010
-5.5
0.4
-7.6
0.1
-6.5
1.9
-17.6
-18.3
-11.2
14.7
-21
2.4
2011
1.7
-0.6
0.5
-9.7
12.8
8.5
2012*
0.5
0.6
0.8
-2.2
3.3
2.7
2013*
1.9
1.9
1.6
3.6
5.2
5.6
Growth rate in %
GDP
Private consumption
Public consumption
Gross fixed capital formation
Exports of goods and services
Imports of goods and services
GREECE
2009
2010
-3.3
-3.5
-1.3
-3.6
4.8
-7.2
-15.2
-15
-19.5
4.2
-20.2
-7.2
2011
-6.9
-7.1
-9.1
-20.7
-0.3
-8.1
2012*
-4.7
-5.7
-11
-6.6
3.2
-5.1
2013*
0
-1.1
-9.5
6.7
5.4
0
*European commission forecast, spring 2012
Source: Eurostat
Българска народна банка
3
Bulgarian National Bank
Economic and Financial Links between
Greece and Bulgaria
4
Българска народна банка
Bulgarian National Bank
Foreign Trade and Tourism
• Greece is among the five most important trading
partners of Bulgaria – in 2011 7% of Bulgarian
exports were directed to and 5% of Bulgarian
imports originated from Greece in 2011.
• Tourism between Bulgaria and Greece is well
developed – in 2011 Greek tourists were 13% of the
total number of tourists who visited Bulgaria.
• The total inflow of income and current transfers
from Greece to Bulgaria has been in the range of
EUR 70-80 million (for the 2006-2011 period)
around 7% of the total.
5
Българска народна банка
Bulgarian National Bank
Foreign Direct Investment from Greece to
Bulgaria
• In the pre-crisis years around 10% of total FDI
inflow to Bulgaria originated from Greece. At the
end of 2011 the share of Greece in the stock of FDI
amounted to 8%. Financial intermediation
accounts for close to half of it (47.5% as of March
2012).
The Banking Sector
• The share of Greek banks assets in the total
amount of assets of the Bulgarian banks was 24%
at the end of 2011 decreasing from 29% at the end
of 2008.
6
Българска народна банка
Bulgarian National Bank
Developments during the Global
Economic Crisis and Current Trends
7
Българска народна банка
Bulgarian National Bank
Foreign Trade
•
Exports of Bulgaria to Greece proved to be
resilient and recorded a positive growth rate
despite the negative real growth rate in Greece in
the period 2008 - 2011. After the worldwide drop
in foreign trade at the end of 2008 the recovery of
Bulgarian exports to Greece was in line with the
overall Bulgarian export growth.
8
Българска народна банка
Bulgarian National Bank
Exports of Bulgaria to
Greece
(annual nominal growth
rate in %)
Share of Bulgaria in
Greece's imports
3
40
30
2.5
20
2
%
%
10
0
1.5
-10
1
-20
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-30
2001
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0.5
Exports to Greece
Source: BNB, Eurostat
Българска народна банка
Total exports of Bulgaria
9
Bulgarian National Bank
Structure of Bulgarian
Exports to Greece
in 2008
Investment
goods 3.9%
Mineral
fuels, oils
and
electricity
18.2%
Consumer
goods
25.1%
Structure of Bulgarian
Exports to Greece
in 2011
Investment
Mineral
fuels, oils
and
electricity
13.9%
goods
Consumer
goods
30.9%
5.4%
Raw
materials
52.8%
Source: BNB
Българска народна банка
Raw
materials
49.7%
10
Bulgarian National Bank
Structure of Bulgarian
Imports from Greece
in 2008
Investment
Mineral
fuels, oils
and
electricity
10.3%
Consumer
goods
16.0%
goods
10.1%
Raw
materials
63.5%
Source: BNB
Българска народна банка
Structure of Bulgarian
Imports from Greece
in 2011
Mineral
fuels, oils
and
electricity
Investment
12.2%
goods
6.9%
Consumer
goods
26.5%
Raw
materials
54.2%
11
Bulgarian National Bank
Characteristics of Bulgaria’s Trade
Relations with Greece
60
50
40
30
20
10
0
2007
Trade intensity index
2008
2009
Trade complementarity index
Source: WITS
Note: The indices are based on HS 6-digit level data
Българска народна банка
2010
12
Bulgarian National Bank
Commodity Structure of Foreign Trade
between Bulgaria and Greece – raw
materials
• The predominant part of Bulgaria’s exports to
Greece consists of raw materials – metals and raw
materials for the food industry.
• Greece’s exports of non-ferrous metals seem to be
correlated with Greece’s imports of non-ferrous
metals. That’s why the drop in domestic demand in
Greece should not have a substantial effect on
Bulgaria’s exports of non-ferrous metals.
13
Българска народна банка
Bulgarian National Bank
Greece’s Exports of Non-ferrous Metals vs.
Imports of Non-ferrous Metals
1800
1600
Million euro
1400
1200
1000
800
600
400
200
Greece's exports of non-ferrous metals
Source: Eurostat
Българска народна банка
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
Greece's imports of non-ferrous metals
14
Bulgarian National Bank
Share of Bulgarian Imports in Greece’s Total
Imports of Non-ferrous Metals
25
20
%
15
10
5
Source: Eurostat
Българска народна банка
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
15
Bulgarian National Bank
Tourism
• In 2009 the growth rate of the number of Greek
tourists visiting Bulgaria remained positive, while
the total number of tourists in Bulgaria declined
• In the following years up to 2011 the growth rate of
this indicator remained above the average growth
of the number of tourists visiting Bulgaria
16
Българска народна банка
Bulgarian National Bank
Share of Greek Tourists in the
Total Number of Tourists Visiting
Bulgaria
Tourists Visiting Bulgaria
(annual growth rates in %)
40
14
35
30
13
25
20
%
%
12
11
15
10
5
10
0
-5
9
-10
2011
2010
2009
2008
2007
2006
2011
2010
2009
2008
2007
2006
2005
2004
2005
-15
8
Total number of tourists visiting Bulgaria
Number of Greek tourists visiting Bulgaria
Source: National Statistical Institute
17
Българска народна банка
Bulgarian National Bank
International Investment Position of
Bulgaria with Greece since 2009
• The share of assets of Bulgarian residents in
Greece in Bulgarian residents’ total foreign assets
has been less than 2% and is slightly declining.
• The share of liabilities of Bulgarian residents to
Greece in total Bulgarian residents’ foreign
liabilities has fallen down from around 12% in
2008 to 8% in 2011.
• The stock of FDI from Greece as a percent of total
stock of FDI declined only slightly in 2010-2011
period.
• Close to half of FDI stock originating from Greece is
invested in sector Financial intermediation and its
absolute value remains stable.
18
Българска народна банка
Bulgarian National Bank
Million euro
International Investment Position of
Bulgaria with Greece
7000
14%
6000
12%
5000
10%
4000
8%
3000
6%
2000
4%
1000
2%
0
0%
2007
2008
2009
2010
2011
Assets of Bulgarian residents in Greece
Liabilities of Bulgarian residents to Greece
Share of Greece in total assets of Bulgarian residents (rh)
Share of Greece in total liabilities of Bulgarian residents (rh)
Source: BNB
Българска народна банка
19
Bulgarian National Bank
Share of Greece in the total stock of FDI in
Bulgaria
10
9
8
7
%
6
5
4
3
2
1
0
2005
Source: BNB
Българска народна банка
2006
2007
2008
2009
2010
2011
20
Bulgarian National Bank
FDI stock by industry (1999-2011)
• Overall
• From Greece
Real estate,
renting and
Electricity, gas and
water supply
4.7%
Other
5.1%
Construction
7.6%
business
Real estate, renting
and business activities
22.1%
activities
Manufacturing
Wholesale and retail
trade
13.3%
Source: BNB
Българска народна банка
3.2%
5.0%
Financial
9.7%
Transport
12.7%
Other
intermediation
47.5%
Wholesale
Financial
intermediation 17.7%
Manufacturing 16.8%
trade
16.4%
Transport
18.2%
21
Bulgarian National Bank
Stock of FDI in Bulgaria
originating from Greece
3500
3000
Million euro
2500
2000
1500
1000
500
0
2006
2007
2008
Financial intermediation
Source: BNB
Българска народна банка
2009
2010
2011
Total
22
Bulgarian National Bank
The Banking Sector
• The overall macroeconomic stability of Bulgaria is maintained
based on the countercyclical policy of the Bulgarian National
Bank, the strong supervision, the stable banking system and
the prudent fiscal policy.
• The Bulgarian banking sector is one of the few banking
systems in Europe where no bank needed to be rescued by
the State. No taxpayers’ money was spent in support of the
financial industry.
• The confidence of domestic depositors in the stability of the
banking system is high – by the end of March 2012 the
deposits of households increased year on year by 13.3% (a
growth rate largely maintained since 2010).
• The banking system is very liquid and capable to pay back
debt to foreign-parent banks. Gradually the dependence on
attracted resources from external sources has been reduced.
At the end of March 2012 less than 13% of total attracted
resources comes from foreign parent banks, compared to
almost one fourth at the end of 2008.
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Българска народна банка
Bulgarian National Bank
The Banking Sector
Market shares (% of assets, March 2012):
 subsidiaries of EU banks: 68.4%
72.7%
 branches of banks licensed in the EU: 4.3%
 Bulgarian-owned banks: 25%
 Subsidiaries & Branches of non-EU parents: 2.3%
Banking System Indicators (%)
%
2008
2009
2010
2011
March
2012
Return on assets (ROA)
2.12
1.08
0.84
0.63
0.91
Return on equity (ROE)
Capital adequacy
Tier I capital adequacy
NPL net (more than 90
days overdue)
Liquidity (LAR)
Credit Growth (y-o-y)
20.26
14.93
11.16
8.95
17.04
14.03
6.55
17.39
15.16
4.93
17.55
15.73
6.96
17.52
15.84
1.63
21.65
32.2
4.14
21.9
4.5
8.02
24.35
2.7
9.6
25.53
4.09
10.71
25.75
3.72
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Българска народна банка
Bulgarian National Bank
The Greek Banking Groups Subsidiaries in
Bulgaria
• The Greek banking groups presence in Bulgaria is by
subsidiaries. There is only one branch of a Greek bank with a
negligible market share in Bulgaria.
• The subsidiaries operate under the strict banking supervision
of the BNB and they are required to abide by the domestic
prudential regulations and standards, which are more
conservative than those in the euro area.
• The shareholders have confirmed their long-term interest in
Bulgaria and the strategic nature of the Bulgarian market.
• After rapid credit expansion in the 2004-2008 period the
market share of the Greek banking groups subsidiaries
peaked up to 29% in 2008 and remained stable at 28% in
2009 – 2010.
• In 2011 their market share has declined to the current level
of 24%.
25
Българска народна банка
Bulgarian National Bank
Subdued Risks to the Greek Banking
Groups Subsidiaries:
• The Greek banking groups subsidiaries in Bulgaria are well
capitalized.
• While the overall level of the subsidiaries’ attracted funds has
been gradually declining in 2011, the households’ confidence
in them has been preserved and the households’ deposits
stay stable (stable core deposit base).
• The subsidiaries are liquid and at the background of weak
domestic demand for credit they allocate the excess liquidity
to pay back their debt to the parent–banks. Since the
parental funding was extended in the credit boom years in
order to gain market share in Bulgaria by strong credit
growth, the repayment of debt does not endanger the liquidity
position of the subsidiaries.
26
Българска народна банка
Bulgarian National Bank
Financial Markets
• There are no contagion effects from the Greek debt
crisis to the financial market in Bulgaria.
• Interest rates in Bulgaria have started to decline
shortly after the outburst of the global crisis.
• Long term interest rates on Bulgarian government
securities are also on a declining trend.
• The CDS spreads on Bulgarian government debt
move in correlation with the overall market
sentiments.
27
Българска народна банка
Bulgarian National Bank
Interbank Money Market
(Overnight Interest Rate - LEONIA)
7
6
5
4
%
3
2
1
0
-1
-2
2008
2009
Spread (Leonia-Eonia)
2010
2011
LEONIA
2012
EONIA
28
Българска народна банка
Bulgarian National Bank
Interbank Money Market
(3 m Interest Rate - (Sofibor)
8
7
6
%
5
4
3
2
1
0
2008
2009
2010
Spread (Sofibor (3m) - Euribor (3 M)
2011
Sofibor (3 m)
2012
Euribor (3м)
29
Българска народна банка
Bulgarian National Bank
CDS spreads and interest rates in Bulgaria
up to 600 as
of May '12
14
12
%
10
8
6
4
2
0
2008
2009
2010
2011
2012
BG Credit Swap 5Yr Spread (Mid)(%)
GR Credit Swap 5Yr Spread (Mid)(%)
BG Long-term interest rate
BG Corporate lending rate (new business)
Source: BNB, JP Morgan
Българска народна банка
30
Bulgarian National Bank
Conclusions
• The spill over effects from the Greek economic
growth developments to the Bulgarian economy
seem rather weak.
• The process of paying back liabilities to parent
banks by the Greek banking groups subsidiaries,
operating in Bulgaria, is smooth, it does not
endanger their liquidity or solvency position.
• The Bulgarian banking system as a whole remains
resilient, well capitalized and stabile, benefiting
from the high level of confidence of depositors.
• Interest rates in Bulgaria exhibit a declining trend
and low volatility.
31
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Bulgarian National Bank
THANK YOU FOR THE ATTENTION!
Българска народна банка
Bulgarian National Bank