July 8 (SeeNews) - The Bulgarian economy is expected to contract by up to 4.0% this year which will slow bank lending growth to 5.0%, central bank Deputy Governor Rumen Simeonov said on Wednesday.
“We had an annual GDP growth of around 6.0% until last year and it is expected to be minus 3.0%-4.0% [this year],” Simeonov told local business daily Pari in an interview.
The Bulgarian economy contracted by 3.5% on the year in the first quarter of 2009, slipping into recession.
The contraction of the economy will slow lending growth and will lead to deterioration in the servicing of loans already extended, Simeonov added.
“For this year we expect a credit growth of 5.0%. I hope, however, that in 2010 the banking system will achieve a lending growth of 10%,” he said.
In February Simeonov said that lending growth was expected to decelerate to 10-15% in 2009 from 32.5% last year.
He said in the interview with Pari daily that at present Bulgaria's currency board system is stable and there no need to unpeg the local lev currency from the euro.
Bulgaria operates an IMF-prescribed currency board which pegs the lev at a fixed exchange rate to the euro, curbs the central bank’s monetary operations and bans the central bank from lending to the government.
Simeonov said that for the time being Bulgaria needs no aid from the IMF to cope with the adverse effects of the economic downturn.
His words were in contrast with the opinion of centre-right GERB party, which won the country's general election on Sunday, ousting the Socialist-led tripartite government coalition. GERB has said the next government will seek a quick meeting with the global lender but not a deal at any cost.