28.05.2024

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 at “BBB/A-2”. The outlook remains positive.

S&P Global Ratings point out that if a stable government emerges quickly from the June elections – avoiding a prolonged period of unstable government similar to 2021–2023 – they believe there will be limited delays to the country's euro area accession. Bulgaria still does not meet the price stability criterion out of the convergence criteria that all countries must meet before joining. According to the rating agency, even if Bulgaria were not to accede to the euro area in 2025, it would likely be delayed only to 1 January 2026.

Notwithstanding an ageing and declining working-age population, S&P Global Ratings think that Bulgaria's economy has strong growth prospects over the next few years. They project real GDP growth at slightly below 3% on average during 2025–2027, backed primarily by domestic demand expansion. Consumption will remain strong amid a resilient labour market with near-record-low unemployment levels and positive real wage growth. At the same time, ample EU funds will underpin investment activity for several years. The rating agency estimates available grants and loans to Bulgaria under the EU's 2021–2027 Multiannual Financial Framework (MFF) and Next Generation EU (NGEU) at about a substantial 29% of forecasted 2024 GDP.

Bulgaria has one of the strongest fiscal track records in Central and Eastern Europe and according to the rating agency its current fiscal plans will result in deficits below 3% of GDP through 2027, keeping debt, net of liquid government assets, at about 20% of GDP by 2027. Similarly, S&P Global Ratings expect the current account deficit to remain a narrow 1% of GDP on average and to be overfunded by EU funding and foreign direct investment inflows.

S&P Global Ratings could raise the ratings over the next two years, potentially by several notches, if Bulgaria became a euro area member.

S&P Global Ratings could revise the outlook to stable if the prospect of Bulgaria joining the euro area becomes less likely.

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