01.06.2020

The international credit rating agency S&P Global Ratings affirmed its long-term and short-term foreign and local currency sovereign credit ratings on Bulgaria “BBB/A-2” and revised the outlook to stable from positive.

The revision reflects the expectations for a significant deterioration of growth prospects for Bulgaria and other economies in 2020, related to measures to contain the COVID-19 pandemic. According to the credit rating agency, risks to the macroeconomic and fiscal path have increased; however, having in mind that the country’s macroeconomic imbalances have reduced markedly over the past years, the analysts expect the Bulgarian economy to recover in 2021.

The opinion of S&P Global Ratings is that Bulgaria is entering the current recession with a strong external balance sheet after years of current account surpluses. Government debt is low and the country has posted general government surpluses over the past four years. The credit rating agency thinks that the policy response to the pandemic will not jeopardise the stability of public finance and points out that the currency board regime in the country fosters prudent fiscal policies. The analysts from S&P Global Ratings also point out that Bulgaria is making steadfast progress toward joining ERM II and the Banking Union. The ratings are constrained by the institutional environment and the country's low GDP per capita in a European comparison.

Some of the main factors that could lead to raising the rating are as follows: if the country returns to its previous growth trajectory without a buildup of major macroeconomic imbalances, or if its external performance is significantly better than the current projections of the agency. Respectively, the factors that could lead to negative rating action include any emerging external, macroeconomic or fiscal imbalances.

You can read the full text of the press release of S&P Global Ratings here.