12.12.2015

Standard&Poor's Credit Rating Agency affirmed Bulgaria's long-term and short-term foreign and local currency sovereign credit ratings "BB+/B", outlook stable. The ratings are supported by the low government debt and the moderate external indebtedness. The agency indicates as constraining factors the relatively low income-per-capita levels and the weak institutional settings. Standard&Poor's estimates that the financial sector continues to face important challenges, but notes that efforts are underway to mitigate risks, including an asset quality review in the banking system slated for 2016.  

The agency estimates that the economic growth in 2015 will be 3% supported by the government's efforts to increase the absorption of EU funds, with the prospects for 2016-2018 being somewhat weaker. It expects the budget deficit to narrow to 2.8% of GDP (on an accrual basis) in 2015 and thereafter to gradually narrow to 2% of GDP in 2018.

The stable outlook reflects the balance between the economic and fiscal risks.

Standard&Poor's indicates the conditions whereunder it could consider an upgrade of Bulgaria's ratings, namely if the government effectively addresses governance issues, thereby boosting the economic growth potential and attracting higher foreign direct investment to the tradeables sector; or if the economy expands faster than anticipated, such that general government finances consolidate more rapidly.

At the same time, the agency could lower the ratings if the domestic financial system requires substantial financial support, or if outflows on the financial account result in pressures on the balance of payments of the country.