Bulgaria is more susceptible to contagion risk from the Greek crisis than neighboring Romania or Turkey, because Greek banks control 28 percent of the Balkan country’s market, said Citigroup Inc. “Bulgaria stands out in terms of the presence of Greek banks, followed by Romania and Turkey,” Citigroup economists including Ilker Domac in Istanbul said in a report yesterday.
“This, in turn, leaves the country more vulnerable to adverse shocks associated with Greek banks’ funding.” Greece’s struggle to finance the European Union’s widest budget deficit “could lead Greek banks to shrink their balance sheets in the region, which could in turn trigger a sharp contraction in credit availability,” according to the report. Still, there is no evidence that this sort of contagion is taking place, Citigroup said in the report. Lending growth in Bulgaria slowed to 5 percent in 2009 as the country grappled with its first recession in 12 years.
(Bloomberg)