Standard & Poor's Raised the Outlook for Bulgaria's Credit Rating

The international rating agency "Standard & Poor's" raised the outlook for Bulgaria's credit rating to positive from stable, the Ministry of Finance announced. The agency confirms the long-term and short-term credit rating of Bulgaria in foreign and local currency 'BBB/A-2'. The positive outlook reflects the opinion of the rating agency that there is a probability, at least one in three, that Bulgaria will join the Eurozone in the next 24 months, informed the BNR.

The governing coalition, formed in June, represents the first stable Bulgarian government in the last two years, after five parliamentary votes, wrote S&P Global Ratings, quoted by the Ministry of Finance.

One of the main political goals of the government is the country's accession to the Eurozone, which is planned to be achieved from January 1, 2025. Bulgaria may not meet all the criteria for convergence, especially that of price stability. Even if the country does not join the eurozone in 2025, the rating agency expects that joining is likely to be delayed until January 1, 2026.

Despite an aging workforce, Bulgaria's economy has strong prospects for real growth, with average rates of 3% for the period 2024-2026, driven mainly by domestic demand. Consumption will remain strong due to the good performance of the labor market, which is supporting real wage growth. Sufficient EU funds for Bulgaria, which S&P Global Ratings estimates at over 30% of GDP for 2023, will support investment activity in the coming years. Obtaining and using all available funds will be challenging as the deadlines for the main funding programs - the EU's Multiannual Financial Framework 2014-2020 and the Recovery and Resilience Facility, under the approach "EU Next Generation Program" (NGEU).

S&P Global Ratings rates Bulgaria's fiscal performance as one of the best among Central and Eastern European countries and expects current fiscal plans to result in deficits below 3% of GDP in the period to 2026, keeping net government debt below 20 % of GDP. They expect the current account deficit to remain low and overfinanced by EU funds and foreign direct investment flows, limiting the need for external financing and maintaining a stable external position.

S&P Global Ratings would raise the credit rating in the next two years, potentially by several notches, if Bulgaria becomes a member of the Eerozone. The agency notes that they would revise the outlook to stable if the expectations of Bulgaria's accession to the eurozone become less likely.

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