site.btaStandard&Poor's Affirms Bulgaria's Credit Rating at 'BB+/B' with Stable Outlook

Standard&Poor's Affirms Bulgaria's Credit Rating at 'BB+/B' with Stable Outlook

Sofia, December 12 (BTA) - The Finance Ministry announced on Friday that Standard & Poor's Ratings Services has affirmed its 'BB+/B' long- and short-term foreign and local currency sovereign credit ratings on Bulgaria. The outlook is stable.

The ratings are supported by the government's moderate net debt position, estimated at nearly 20 per cent of 2015 GDP. The ratings on Bulgaria are constrained by its relatively low income levels, with GDP per capita estimated at 6,800 US dollars in 2015 and weak institutional settings. Bulgaria's financial sector continues to face important challenges, but efforts are underway to mitigate risks, including an asset quality review slated for 2016.

The agency estimates that the Bulgarian economy will grow by 3 per cent in 2015 supported by the government's efforts to increase the absorption of EU structural and cohesion funds but prospects for 2016-2018 are somewhat weaker. The general government deficit is expected to narrow to 2.8  per cent of GDP in 2015 on an accrual basis and thereafter gradually narrow to 2 per cent of GDP in 2018.

The stable outlook on Bulgaria reflects the balance between the economic and fiscal risks from potential vulnerabilities in the financial sector against the fiscal space arising from still-low general government debt. An upgrade could be considered if Bulgaria effectively addresses governance issues, thereby boosting its growth potential and attracting higher foreign direct investment to the tradeables sector; or if the economy expands faster than we anticipate, such that general government finances consolidate more rapidly. Or the ratings could be lowered if the domestic financial system requires further substantial government support, or if outflows on the financial account result in pressures on the balance of payments.