(C) The Bulgarian capital market in 2009 – outlook (negative)

It is 08Q4 when the economy has actually started to feel the first symptoms of the economic crisis. Invading through the financial system, the lack of bank financing, coupled with the failing EU programs has cornered the real sector’s investment and production plans.

The positive hypothesis for 2009 states liquidity trap exit and first steps towards global economy recovery. In the context of rising bad loans in our banking system, however, I do not believe that the business lending will make a comeback, leave alone with attractive rates, since it needs to incorporate much higher risk levels in the economy.

Since the markets mirror the economy six to twelve months ahead, it is possible to see green year in 2009, if only 2010 shows symptoms of recovery.

The negative hypothesis for a global economy recession, states unambiguously a negative outlook both for the Bulgarian economy and the Bulgarian capital market.

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Some under-priced upward corrections though will be more than welcomed.