17.12.2010

On 17 December 2010 Standard & Poor\'s Ratings Services affirmed the long- and short-term foreign and local currency \'BBB/A-3\' sovereign credit ratings on the Republic of Bulgaria. The outlook on the long-term ratings is stable. The transfer and convertibility assessment remains unchanged at \'A\'.

\"The ratings on the Republic of Bulgaria factor in our favorable view of its fiscal track record, its low gross debt, and its medium-term growth prospects--particularly if they are backed by improving absorption of EU funds and other benefits stemming from EU membership. The stable outlook balances Bulgaria\'s favorable fiscal position and economic growth prospects with its external vulnerabilities\", S&P point out in their rationale. \"During 2010-2011, weak domestic demand will likely lead to a further decline in the current account deficit, which net equity inflows and EU transfers will cover\", the rating agency forecasts.

In their rationale for the assessment they also point out that the government has appropriately addressed the deterioration in budget gaps and the rating agency expects a budget deficit of below 3% of GDP in 2011. \"As a result, we expect general government debt to reach just below 20% of GDP in 2011\", S&P forecast.

In regard to gross financial sector external debt the rating agency forecasts that it will fall to $9 billion by the end of 2010 from $12 billion on 31.12.2009. Standard & Poor\'s expect that bank external borrowing will stabilize because they think the banking system is well capitalized, with a strong regulatory and supervisory framework.