The Financial Crisis and Business


March 2011


The financial crisis hit households less than it hit the business environment, according to data from the sociological study of the Open Society Institute – Sofia carried out in December 2010. Barely some 5% of firms in the country share they have remained unaffected by the crisis. The effect of the crisis on households took mostly two forms – a decrease in wages (15.3%) and job loss (11.9%), while companies were generally affected in more than just these two ways.
The negative effects of the crisis are felt the least by small firms with annual revenues of up to 100,000lv. Medium-sized firms with annual revenues between 500,000 and 1,000,000lv were subject to a significantly stronger impact, even higher than the average with regards to increased debt-servicing expenses. Companies with annual revenues from 1 to 5 million lv. seem to be the ones affected the most, and in numerous ways as well. They suffer mainly from debts payable to other firms (72.3%) as well as from payable public expenses (21.1%) such as annual income taxes, employee benefits, etc. These firms are also the most affected by the decreases in retail prices (52.7%) and among the most affected by the increases in debt-servicing expenses (22.6%). Wholesale businesses with annual revenues of more than 5 million lv. suffer significantly from delayed payments from clients as well as from the state and the National Revenue Agency (31.5%).
In the current situation, Bulgarian businesses (with the exception of the smallest firms) are more optimistic about their own development prospects than about the general economy of the country, as compared to the average households’ expectations.
The people, small firms and big businesses also differ in their attitudes towards the financial system in Bulgaria. The currency board system, in which the lev is pegged to the euro, receives the support of both the people and of firms. However, the attitudes towards future Eurozone accession are very different. The Top 100 companies (according to revenue) are more willing to accept the euro, but the people would vote against, were there an actual referendum on the issue
More comments on the case study conducted by the Open Society Institute – Sofia can be found in the last issue of Politiki and in the new issue of Kapital newspaper.


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