Author: Ekaterina Kirilova, Head of Marketing and Segments Department, UniCredit Bulbank

How would you describe 2013?

The passing year was dominated by the constant decrease of bank deposit interest rates and by the tax on term deposit interest income of individuals. Counterintuitively, the introduced tax did not affect people’s consumption behavior and did not result in any serious loss of interest among households. A certain role in it had the fact that almost all banks on the market offered an alternative to term deposits – various termless current and savings accounts with attractive interest terms. This explains the substantial growth of 36.5% in the attracted funds on these accounts for the past 12 months (for comparison, the growth in term deposits is 4.9%).

People’s savings continued to grow, although more slowly than in the previous two years. Their figures remain impressive – from the beginning of the year until the end of October 2013 they increased by nearly BGN 1.6 billion to a record BGN 36.5 billion, which represents a growth of 8.5% (as against October 2012 the growth is 9.3%).

As far as the preferred savings currency is concerned, Bulgarians traditionally choose the national currency and this year savings in BGN have grown twice more than those in EUR.

The country’s political and economic environment continues to affect strongly the consumption behavior of the population. As a result, in the passing year we have once again witnessed the Bulgarian trademark formula “save to consume”. This is proven by the significant decrease in bank loans, according to a BNB report, and by the results of the representative national research of the Economic Research Institute with the Bulgarian Academy of Sciences, according to which nearly 60% of the respondents have claimed that they would not under any circumstances resort to a bank loan. Meanwhile, only in October 2013 Bulgarians saved BGN 360 million, which is twice the September amount.

In the last two months of the year we can expect a certain delay in the growth of savings as this is traditionally a period of increased consumption related to the upcoming holidays.

Expectations for 2014:

There would hardly be any drastic changes in the consumption behavior of households in the following year. Most probably Bulgarians will continue to be cautious when making financial decisions and will refrain from irrational and spontaneous buying.

Naturally, interest rates on deposits will continue to go down and we may expect them to reach pre-crisis levels. At this point, the banking system has excess liquidity and banks are rather looking for ways to sell the attracted funds than to purposefully try and attract new volumes at a high price. The lower interest rates are unlikely to affect people’s savings and they will continue to grow but at much slower rates.

Although Bulgarians generally choose savings and deposit accounts as a preferred means of saving, it is not unlikely that we may see some activity in other financial derivatives too. Looking for instruments which could ensure them a higher yield and a way to cope with inflation, it is highly probable that depositors will direct some of their savings towards the increasingly popular mutual and voluntary pension funds as a means for long-term saving and ensuring a good living standard for the years after retirement.

More information for clients:

UniCredit Bulbank, Call Centre

Phone: 0700 1 84 84

More information for media:

UniCredit Bulbank, Identity & Communications Department

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Ekaterina Ancheva, Phone: + 359 2 9264 963, flbufsjob/bodifwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch