05.12.2016

The international credit rating agency S&P Global Ratings 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 government's moderate debt position and the reduction of the external indebtedness. The ratings are constrained by the relatively low GDP-per-capita levels and the weak institutional setting.

The Agency points out that the economic recovery of the country has been accelerating in 2016, alongside improvements in the labour market, a narrowing budget deficit, and a current account surplus. These improvements could be thwarted if the increased political uncertainty following the government resignation hampers economic recovery or leads to a lax fiscal stance.  

The stable outlook of the ratings reflects, on the one hand, the balance between the ample fiscal space of the country with government low debt and continuing economic recovery and, on the other hand, a potential fiscal and economic uncertainty which could result from the current political situation.

The agency could consider an upgrade if Bulgaria effectively addressed governance issues, thereby boosting its growth potential. An upgrade is also possible in case fiscal performance improves beyond the Agency's expectations and if the country manages to further reduce its external liabilities. On the other hand, the Agency could consider lowering the ratings if the domestic financial system required further substantial government support, or if outflows on the financial account resulted in pressures on the balance of payments. A weaker-than-projected fiscal consolidation path, with significant expenditure slippage or a regress on institutional advancements, could also put pressure on the ratings. 

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