From the position of the BNB and in view of the goals for controlling inflation, it is very important that the country does not assume significant additional permanent expenditures, which are not backed by permanent revenues. There are two groups of risks associated with such an approach: (i) the risk of an inflationary spiral and (ii) the need for painful fiscal adjustments in the near future, whether in terms of revenue, i.e. by increasing taxes, or by cutting costs. Along with external factors, this would lead to a significantly more complicated macroeconomic environment for the Bulgarian banks. In terms of the external factors and their further complication and deterioration because of the war in Ukraine, most important will be the decisions of the big leading central banks, primarily the ECB in our case. There are already clear statements about three things that will happen during the third quarter of this year: (i) the ECB will effectively end net asset purchases from the beginning of July; (ii) subsequently the ECB intends to raise its key interest rates; and (iii) will do it again in September so that by the end of the quarter we will move away from negative interest rates. Obviously, in the following months and at least a year ahead we will be facing the challenge to find the very difficult balance between the measures to control inflation and the measures to prevent recession. How is our banking sector meeting the new challenges? Our starting position remains very good.
We did it in March 2020, when it was still debated if it wasn't just a common cold that would go away in the summer. The alternative was to wait, monitor and analyse the situation for at least a few months before taking concrete action. From today's perspective, we can say that such waiting could have impacted very adversely banks, businesses and households alike. It was that anti-crisis package that allowed the introduction of a moratorium on loan repayments, which at its peak exceeded BGN 9 billion. Here is the place to emphasise that this was a private moratorium, an initiative by our commercial banks, as they better than anyone else understand that when their customers are not well, they are not well either. The Association played a key role in that process, which, among other things, is another testament to the excellent cooperation between the Association and the BNB. As with all our meetings, we prefer to look forward rather than backward. Unfortunately, what we see ahead are new challenges. On the one hand, these are the political and economic processes in the country. The intersections of their dynamics and development are basically three: prices, prices, and prices again. The outcome of the budget process that is currently underway will be indicative of the direction of these dynamics and development.