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Economy and Banking Sector of Bulgaria

Bulgaria
Location
Southeastern Europe
Population  (2017)
7 101 859  (-0.01%)
EU Status
member since 2007
Currency
BGN (Bulgarian lev)
Nominal GDP (2016)
48.1 bln EUR  (+0.08%)
Credit Ratings (as of Sep 2016)
BBB-/Baa2
Consolidated Banking Assets (2016)
48 034.48 mln EUR  (+5.59%)
Deposit Guarantee
100 000 EUR
Number of Banks
29

Bulgaria is a country in southeastern Europe, a member of the European Union since 2007.

Agriculture and tourism have been important components of Bulgarian economy. In recent years low salaries and low corporate income tax rates, attracted foreign companies into technological and research sector. However, factors like corruption, a weak judiciary, and organized crime impede the country's investment climate and economic growth.

Bulgarian banking system is characterized by relatively high concentration: competition between the major banks is making it difficult for other banks to compete. Another feature of the Bulgarian banking system is a prominent share of foreign capital.

List of Banks in Bulgaria
Banks in Bulgaria

National Currency

Bulgarian Lev (BGN)

Exchange Rate

1 EUR = 1.9558 BGN (2017-10-19)

During the last 11 years EURBGN exchange rate was within the range 1.9558 - 1.9558, reaching its maximum in Jul 2016 and falling to its minimum in Jul 2016.

Euro to Bulgarian lev (EURBGN). Chart 1. Euro to Bulgarian lev (EURBGN). Source: ECB.

GDP

Nominal GDP (2016)Nominal GDP per Capita (2016)Real GDP Growth (2016)
48.1 bln EUR  (+0.08%)6 800 EUR  (+0.07%)3.9 %  (2015: 3.0 %)

According to Eurostat, nominal GDP of Bulgaria in 2016 was 48.1 bln EUR.

Bulgaria outperforms the European Union in terms of real GDP growth with the average annual differential coming to 0.9% over the past 10 years (2006 - 2016). In 2016 real GDP growth was 3.9% which was above the Euro Area average (1.8%) and above the European Union average (1.9%). Real GDP growth in 2017 - 2022 are IMF's estimates.

Real GDP Growth in Bulgaria. Chart 2. Real GDP Growth in Bulgaria. Source: Eurostat, International Monetary Fund.

In 2016, nominal GDP per capita in Bulgaria was 6 800 EUR.

Bulgaria has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -43.6% over the past 10 years (2006 - 2016). GDP per capita at PPP in 2017 - 2022 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Bulgaria; European Union = 100. Chart 3. GDP Per Capita at Purchasing Power Parity in Bulgaria; European Union = 100.

Inflation Rate

CPI, MoM (Sep 2017)CPI, YoY (Sep 2017)CPI, Year Average (2016)
-0.2 %  (Aug 2017: 0.2 %)1.3 %  (Aug 2017: 0.7 %)-1.3 %  (2015: -1.1 %)

According to Eurostat, inflation rate in Bulgaria in 2016 expressed as annual percentages of average consumer prices was -1.3% which was below the Euro Area average (0.2%) and below the European Union average (0.3%). Inflation rates in 2017 - 2022 are IMF's estimates.

Inflation Rate in Bulgaria. Chart 4. Inflation Rate in Bulgaria. Source: Eurostat, International Monetary Fund.

Unemployment Rate

Unemployment Rate (2016)
7.6 %  (2015: 9.2 %)

Government Bond Yield

Government Bond Yield (Sep 2017)
1.66 %  (Aug 2017: 1.70 %)
According to Eurostat, government bond yield in Bulgaria in Sep 2017 was 1.66%, compared to 1.70% in Aug 2017.
Government bond yield of Bulgaria. Chart 5. Government bond yield of Bulgaria. Source: Eurostat.

Credit Ratings (as of Sep 2016)

Fitch Moody's
BBB- (good credit quality), outlook stable Baa2 (lower medium grade), outlook stable

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

DTAs of Bulgaria: 52 Signed Agreements

Bulgaria signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Albania
 Austria
 Azerbaijan
 Bahrain
 Belgium
 Canada
 China
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Estonia
 Finland
 France
 Georgia
 Germany
 Greece
 Hungary
 India
 Indonesia
 Ireland
 Israel
 Italy
 Japan
 Kazakhstan
 Korea, Republic of
 Latvia
 Lebanon
 Lithuania
 Luxembourg
 Macedonia
 Malta
 Morocco
 Netherlands
 Norway
 Poland
 Portugal
 Qatar
 Romania
 Russian Federation
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sweden
 Switzerland (Oct 2013)
 Turkey
 Ukraine
 United Arab Emirates
 United Kingdom
 United States

Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Automatic Exchange: Starts in September 2017

Bulgaria signed the automatic information exchange agreement on 29 October 2015 and committed to start the automatic information exchange in September 2017.

Further Information

FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

FATCA Status in Bulgaria
IGA in effect since 05 December 2014, Model 1

Bulgaria has FATCA agreement with the U.S. in effect since 05 December 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Bulgaria are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is non-reciprocal: Bulgarian financial accounts hold in U.S. financial institutions will not be reported to Bulgarian authorities.

Further Information

Financial Market Development

Financial Market Development
4.1 (max 7.0), 58th out of 138 countries
Banks' Soundness
4.3 (max 7.0), 96th out of 138 countries

According to World Economic Forum's Global Competitiveness Report 2017-2018, financial market development in Bulgaria is scored 4.1 out of maximum 7.0 and ranked 58th out of 138 analysed economies. Soundness of banks is scored 4.3 bringing Bulgaria into the 96th place, trustworthiness and confidence of financial market is scored 4.6 (47th place).

Financial Market Development in Bulgaria. Chart 6. Financial Market Development in Bulgaria. Source: WEF.

Deposit Guarantee Scheme

Maximum Protected Amount
100 000 EUR

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Bulgaria are summarised in Table 1.

Scheme Participantsall credit institutions operating in Bulgaria, branches of non-EU banks, branches of Bulgarian banks abroad
Scheme Exemptionsbranches of EU-banks (covered by their home countries)
Eligible Depositorsnatural persons, legal entities
Covered Accountsall funds on a bank account (term deposit, demand deposit, savings or current account, etc)
Covered Currenciesall
Maximum Protected Amount100 000 EUR
Paid In CurrencyBGN

Table 1. Deposit guarantee scheme in Bulgaria.

Further Information

Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local Currency (Bulgarian lev) Foreign Currency
A3 (upper medium grade) Baa2 (lower medium grade)

Local currency (Bulgarian lev) deposit ceiling for Bulgaria is set to A3 (upper medium grade), foreign currency deposit ceiling is Baa2 (lower medium grade).

Deposit Rates

Average Deposit Rate (Aug 2017, BGN)
0.16 % (unchanged)
In Aug 2017, an agreed annualised deposit rate in local currency (Bulgarian lev) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.16% .
Deposit Rates in Bulgaria. Chart 7. Deposit Rates in Bulgaria. Source: ECB.

Further Information

Banking Sector Structure

Number of Banks
29
Consolidated Assets (2016)
48 034.48 mln EUR  (+5.59%)
Recent Changes (2016)
new banks: 0, closed banks: 0

Currently there are 29 credit institutions operating in Bulgaria.

In 2016 consolidated banking assets in Bulgaria were 48 034.48 mln EUR. The consolidated banking assets' evolution is shown at Chart 8 below.

Consolidated banking assets in Bulgaria. Chart 8. Consolidated banking assets in Bulgaria.

Recent structural changes (2013 - 2016) of the banking sector of Bulgaria are summarised in Table 2.

2013201420152016
Number of Opened Banks0000
Number of Closed Banks0200

Table 2. Recent structural changes in the banking sector of Bulgaria.

All the credit institutions operating in Bulgaria can be classified into several categories. Table 3 summarises the number of banks in each category.

CategoryNumber of Banks
Banks22
Branches of foreign banks6
Central banks1

Table 3. Number of banks by category in Bulgaria.

There are 6 branches of foreign banks from 6 different countries in Bulgaria. Table 4 shows the number of branches grouped by the country of origin.

Country of OriginNumber of Branches
 Germany1
 Greece1
 France1
 Ireland1
 Netherlands1
 Turkey1

Table 4. Number of branches of foreign banks in Bulgaria grouped by country of origin.

Time Deposit Accounts

Minimal Interest Rate
1.26 %
Maximum Interest Rate
1.26 %
1 offers from 1 banks