Trends in Lending in Bulgaria during the Global Financial Crisis
Abstract
The global financial crisis significantly altered the dynamics of banking activity across Europe, including Bulgaria. Against this backdrop, the present study explores how lending evolved during the period 2007–2008 and how external financial shocks influenced credit growth.
The analysis shows that prior to the crisis, credit expansion was driven by strong economic growth, increased deposits, and favorable macroeconomic conditions. However, as financial instability intensified, banks became more cautious, tightened lending conditions, and increased the cost of borrowing. This shift led to a noticeable slowdown in credit growth, particularly for non-financial enterprises and households.
Empirical data further reveal a close relationship between lending activity and economic performance, with credit growth preceding changes in GDP due to time lags in investment effects. Overall, the study highlights the dual role of lending as both a driver of economic growth and a source of macroeconomic vulnerability.
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