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Non Performing Corporate Loans Stifle Bulgaria’s Business

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Non Performing Corporate Loans Stifle Bulgaria’s Business

(September 19, 2017 Sofia) - According to the latest set of recommendations of the Council of Europe to Bulgaria, the government in Sofia should work to reduce the share of non-performing corporate loans which is far above the average for the EU.
"Corporate debt remains high (well above that of peer countries), placing a burden on companies' balance sheets and potentially constraining credit demand and investment over the medium term.

To reduce the still-high level of corporate non-performing loans, the Bulgarian authorities should facilitate the workout process for banks by drawing on a comprehensive set of tools.

For instance, speeding up the insolvency framework reform would improve the legal environment for dealing with bad debt and provide opportunities for out-of-court restructuring. Beyond the insolvency framework, the toolkit could include supervisory guidance to banks with particularly high levels of non-performing loans.

It could also include actions to make data on asset quality more transparent in order to help to deepen the secondary market for non-performing loans.

Recent labour market developments have been positive, but structural problems remain.

The labour force continues to shrink because of population ageing combined with emigration. As the economy is undergoing structural changes, it is essential to tap into the unused labour potential.

Currently, the labour market is characterised by a high share of long-term unemployed in total unemployment and a high inactivity rate, limited inclusion of young people in the labour market and skills shortages and mismatches.

While the unemployment rate fell below the Union average in 2015, the share of long-term unemployment and the rate of young people not in employment, education or training and the low employment rate of low-skilled people are still major challenges.

In the face of these challenges, active labour market policies are insufficiently targeted towards disadvantaged groups and their needs, which hinders their employability. In addition, the insufficient integration of employment and social services for recipients of social benefits can limit their labour market participation," the document reads.

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