Interest rates on loans will continue to grow this year, but the uptick will be moderated by increased competition among the banks, the quarterly review of the Bulgarian National Bank (BNB) said late last week. Lending activity will remain brisk throughout 2008, but credit growth will slow down to an annual rate of 40 per cnet by the end of the year.

The increase in interest rates is inevitable given the increased cost of external lending resources, the central bank said. BNB is forecasting an annual inflation of eight per cent for 2008, despite the record 14 per cent surge in consumer prices recorded in May.

The expectations of the central bank for a let-up in the inflationary pressures is based on the solid outlook for the agricultural harvest this year and the forecasts for a pullback in oil prices to $130 a barrel.

Bulgarian economic growth will track over six per cent by the end of 2008, the central bank forecast. The inflow of foreign direct investment (FDI) will also remain high. The central bank expects that the current account deficit will be mostly unchanged from 2007.

According to preliminary data, the January-April financial account surplus in the balance of payments is over three billion euro with FDI at 1.2 billion euro, the bank said.