The governor of Bulgaria's central bank said he expects the country's economy to grow by about 0.7% in 2012 after rising by 1.7% last year.
The slowdown is due to the expected recession in the euro area, Ivan Iskrov said in an address to the Association of Banks in Bulgaria published on the website of the central bank earlier this week.
"This would have a direct impact on the potential of banks in Bulgaria to generate incomes from sources of their own. The weak demand for new loans is facing banks with a double challenge. On the one hand, it will be difficult for them to accumulate new buffers from profits; and on the other hand, the existing classified assets will go on putting pressure on the available reserves," Iskrov said.
Last month Bulgaria's finance ministry revised downwards its expectations for the country's economic growth, citing the slowdown in exports as the reason. The ministry expects Bulgaria's gross domestic product to grow by 1.4% in 2012, compared to 2.3% forecast in this year's budget bill.