COVID 19 and Credit Cycle: Evidence for Bulgaria

The pandemic of COVID-19 has dramatically affected about every aspect of the economy. The credit cycle transforms from the record long benign to a stressed one. This paper seeks the access to credit from before the unexpected global health crisis to its immediate and extended impact and the performance of key indicators of the nature of credit cycles. The focus is on the non-financial corporate credit market. At the end of 2019 the firms increased their debt to take advantage of record low interest rates. After the unexpected global health crisis the conditions on the credit market deeply changed. From one site, credit has been used by governments as instrument for recovery of economy and it could be expanded the volume of credit. From other site, during the pandemic time, the demand of credit increases, but not due to effective new projects. By the balance sheet transmission mechanism, credit uses usually as tool to ensure the balance between in- and outflows in the firms during the financial crises. The higher demand raises the price of borrow money. It is change the position of the non-financial companies at credit market and credit cycle goes to new stage.