21.12.2011

Standard&Poor\'s Ratings Services affirmed the sovereign credit rating on Bulgaria at BBB/A-3 outlook stable. The Bulgarian government will continue to maintain a favorable fiscal position on the back of ongoing budgetary consolidation and structural reforms, the press release of the biggest rating agency says.  

S&P analysts report the appropriate fiscal policy and the low gross and net general government debt, as well as the solid medium-term growth prospects backed up by improving absorption of EU funds.           

Agency experts recall that the government has maintained its commitment to budgetary consolidation and expect the deficit for 2011 to be below 2.5% of GDP. The deficit will decline again in 2012, to 1.3% of GDP. Continuing the public-sector wage freeze, as well as implementing pension reform in 2012, including increasing the retirement age and extending the required working period, will strengthen the effort to meet the budgetary target. Moreover, the government is pushing through public-sector structural reforms--including of the railways--which is easing the burden on its balance sheet, S&P highlights.

In order to underpin its budgetary commitment, the government has also adopted a financial stability pact, which limits its spending to 40% of GDP and the general government budget deficit to 2% of GDP, analysts also report. As a result of ongoing budget deficit reduction, the Agency expects general government debt will reach 17.7% of GDP in 2012.

According to Standard&Poor\'s, the banking sector appears well capitalized and liquid; its capital adequacy ratio was almost 18% at third-quarter 2011. The Agency also underpins that helping to stabilize funding is the country\'s strong regulatory and supervisory framework.

The Agency press release says that they could consider raising Bulgaria\'s ratings if the government fully implements its structural reform agenda while consolidating the budgetary position further.