MKB Unionbank showcased on February 21 2008 its latest product, a savings account with an interest rate of 8.18 per cent over an 18-month period, and an additional 10 leva free in return for each 1000 leva.

The non-standard period was predicated by the need to have longer a longer investment horizon, given the global financial turmoil and the ensuing cut in liquidity on the market, said Stoian Bozvelijski, director of MKB Unionbank's retail division.

Bozvelijski said timing was right because deposits had been experiencing an upturn given that investments in mutual funds and real estate were yet to become a viable alternative to bank deposits.

Last year, savings in Bulgaria's banking system grew by 4.4 billion leva to 18.8 billion, a yearly increase of 29 per cent.

Bozvelijski forecast that savings could grow by as much as another 50 per cent this year. The main factors that would influence savings growth would be the speed of development for alternative forms of investment, as well as the impact of the flat tax.

According to MKB Unionbank estimates, the introduction of the flat tax on January 1 this year should result in disposable income increase of 110 leva per capita, Bozvelijski said. Expectations are that the bulk of the revenue increment will be saved rather than spent and that two-thirds of this figure would go banks' way.