Standard and Poor’s Global Ratings revised its outlook on Bulgaria to positive from stable and affirmed its ‘BBB+/A-2’ long- and short-term foreign and local currency sovereign credit ratings on Bulgaria. The positive outlook primarily reflects the potential for Bulgaria’s income levels and growth to strengthen, supported by improved political stability, planned reforms, and EU fund disbursements.
The analysis of the rating agency points out that the snap parliamentary elections in April gave majority to former President Rumen Radev’s recently formed party, bringing to an end five years of political volatility. According to the analysts, the new situation should allow the government to push through anti-corruption measures, meet the conditions for receiving the final installments of Bulgaria’s Recovery and Resilience Plan funding package, and begin fiscal consolidation.
S&P Global Ratings projects that Bulgaria’s GDP per capita will continue rising, having already more than doubled since 2019. Net general government debt remains modest in a global context, expecting it to remain below 30% of GDP through 2029.
According to the rating agency, the impact of the Middle East conflict will drag on short-term growth but, through 2029, the country’s growth will average 2.6%, outpacing the euro area’s growth for the period. According to the analysts, the structure of Bulgaria’s energy mix should help mitigate the energy crisis’ impact.
The factor that could result in raising of the ratings is strengthening Bulgaria’s growth performance and average per capita income, bolstered by government reforms and EU fund disbursements.
S&P Global Ratings could revise the outlook to stable over the next two years if Bulgaria’s growth performance turned weaker than our projections. They could also revise the outlook to stable if the country’s fiscal position materially weakened.
You can read the full analysis here.