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Bulgaria safe from cataclysm

Submitted on Thursday, 16 April 2009No Comment

Eastern Europe continues to be seriously affected by the crisis. The reasons and the possibilities for the outcome of the situation were discussed by the World bank expert Fernando Montes-Negret.”Two things differentiate this region: first, the quick expansion of crediting. In Bulgaria, for example, it grew between 40 and 60 percent per year, which is a huge percentage. Second, a big part of the crediting was financed by external loans. This created several disbalances. We at the World bank observe a very important coefficient – the relation between loans and deposits. It defines what percentage of each loan is financed by the local deposit base of the banks.

If the coefficient is 100%, this means that all loans are financed by local deposits, and everything’s allright. If it is 200%, then 50 percent are financed by local loans, which is a problem. There were countries like the ones in the Baltic region with a coefficient of over 200. This means that they are very dependant on external crediting”, said Fernando Montes-Negret when explaining about the difference of the coefficient of Bulgaria.

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