site.btaS&P Global Ratings Re-affirms Foreign, Local Currency Sovereign Credit Ratings on Bulgaria at BBB/A-2

Sofia, June 1 (BTA) - S&P Global Ratings has re-affirmed its
long- and short-term foreign and local currency sovereign credit
 ratings on Bulgaria at BBB/A-2, and kept a stable outlook, the
Bulgarian Finance Ministry informed on Tuesday.

According to the agency Bulgaria's economic contraction has been
 relatively mild so far, mostly due to resilient domestic
demand. The slow progress on vaccination and a potential
resurgence of the COVID-19 pandemic could mean a
slower-than-expected rebound of external demand, which will push
 some of the expected recovery into 2022. Over the medium term
through 2024, high fund inflows from the previous and current EU
 Multiannual Financing Frameworks as well as additional funds
from the NGEU instrument will provide a solid backdrop for
Bulgaria's economic growth, reads the Finance Ministry release.

Although the results of the recent elections highlight political
 fragmentation and confrontational decision-making, the rating
agency does not believe that these developments will delay the
most important political undertakings, such as progress on
eurozone accession, or EU funds absorption.

Even against this challenging domestic political environment and
 in the course of the pandemic, Bulgaria has retained a solid
fiscal position. Starting in 2022, S&P Global Ratings expects
that consolidation will narrow deficits further, keeping
government debt, net of liquid assets, at a low 20 per cent of
GDP over the next years. External risks also appear manageable
after several years of external net deleveraging, thanks to
recurring current and capital account surpluses, which the
rating agency expects to continue.
    
The stable outlook reflects that, following a relatively limited
 contraction in 2020, Bulgaria's economic recovery over the next
 two years will not incur any external or financial sector
imbalances. This should enable quick fiscal consolidation and
keep public debt low.
 
The rating agency could raise the ratings if Bulgaria's economic
 recovery coincides with quicker fiscal consolidation or
stronger external performance than the currently projected. In
the long run, the ratings on Bulgaria could be raised in the
course of its accession to the eurozone. The ratings could
lowered if the economic contraction proves deeper or the
subsequent recovery is delayed. This would likely result in
protracted fiscal consolidation and continuously rising net
public debt over the next few years. Although unlikely over the
medium term, S&P Global Ratings could also take a negative
rating action if they observe the emergence of imbalances in
Bulgaria's financial sector, the Finance Ministry informs.

NV/MT