Bulgaria: Selected Issues

February 21, 2018

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Bulgaria: Selected Issues, (USA: International Monetary Fund, 2018) accessed December 22, 2024

Summary

This Selected Issues paper investigates the role of debt overhang in explaining weak nonfinancial corporate (NFC) investment in Bulgaria using firm-level data. The study confirms a negative association between measures of debt overhang and investment for Bulgarian NFCs using firm-level data. Bulgaria’s NFCs are the most leveraged among new member states. The findings suggest that high NFC debt overhang could be an important drag on investment. While credit demand is likely to pick up in line with economic activity, high NFC indebtedness could continue to stand in the way of corporate credit recovery. A possible direction for future work is to investigate the existence of different investment cycles across business activities/sectors, and their role in explaining the identified negative relationship. Policies that help reduce the corporate debt overhang could help boost credit and growth. Policy initiatives such as an efficient corporate debt restructuring framework and tax measures could help corporate deleveraging. The findings suggest that high corporate debt could be an important drag on investment.

Subject: Debt burden, Education spending, Expenditure, External debt, Financial institutions, Loans, Public investment and public-private partnerships (PPP), Public investment spending

Keywords: Bulgaria, Company debt, CR, Debt, Debt burden, Debt holder, Debt overhang, Eastern Europe, Education spending, EU funds, Europe, Firm, Global, IMF staff calculation, Investment, ISCR, Loans, Management institution, Public investment and public-private partnerships (PPP), Public investment spending

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2018/047
Stock No:

1BGREA2018002
ISBN:

9781484342107
ISSN:

1934-7685

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