Moody's Raised the Outlook For Bulgaria's Credit Rating

2019-09-02   |

Moody's Agency raised the outlook for Bulgaria's credit rating from stable to positive and reaffirmed the country's long-term foreign and local currency Baa2 rating.

The positive change reflects a strong fiscal stance and favorable prospects for economic growth, the Ministry of Finance said in a statement.

A week ago another international rating agency, Fitch, confirmed Bulgaria's long-term credit rating to BBB.

No one can doubt their clarity, impartiality and accuracy, because this is an assessment of the management given by world credit agencies, Prime Minister Boyko Borissov said in Varna.

The retention of Moody's Baa2 credit rating takes into account the balance between positive fiscal and macroeconomic development and the declared readiness to join the euro area, as well as the country's current challenges.

They are related to negative demographic trends and the presence of weaknesses in some policy areas, Moody's said.

The Agency focuses on improving fiscal performance and pursuing consistent and prudent policies. In recent years, Bulgaria has been characterized by increasing budget surpluses, a steady decline in government debt, an improvement in creditworthiness, a significant fiscal reserve and a positive impact of pension reform on fiscal sustainability. Moody's expects the budget balance to remain in surplus (0.8% of GDP) in 2020, while government debt will continue to decline and reach 19% of GDP.

According to Moody's, Bulgaria's stable growth prospects are driven by continued EU integration and increased competitiveness.

Since 2015, the economy has grown over 3% annually and the Agency expects positive developments to continue in the coming years, with the economy growing around potential. Economic growth will also be supported by some important infrastructure projects, such as the Hemus and Struma highways, the Sofia-Plovdiv railway line and the higher absorption of EU funds.

Increased competitiveness is underpinned by rising export shares and current account surpluses, reflecting structural improvements in the post-crisis economy.

Moody's expects the simultaneous accession to VM II and the Single Supervisory Mechanism (SSM) to contribute to sound macroeconomic policies and to further strengthen the institutions.

The rating can be raised while maintaining positive economic and fiscal development. Further progress in the government's reform program (education, health, state-owned enterprises), as well as euro area membership and SSM membership, would also have a positive impact on the rating, the finance ministry said.

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