site.btaS&P Affirms Bulgaria’s Ratings at BBB/A-2, Outlook Positive

The international agency Standard & Poor's (S&P Global Ratings) has affirmed Bulgaria’s BBB/A-2 long- and short-term foreign and local currency sovereign credit ratings. The outlook remains stable, the Bulgarian Finance Ministry said in a press release on Saturday, reporting the agency’s rating action of Friday.

S&P says that if a stable government emerges relatively quickly from the June elections, avoiding a prolonged period of unstable government similar to 2021-2023, there will be limited delays to the country's euro area accession. Bulgaria still does not meet all convergence criteria (formal conditions that all countries must meet before joining), including for price stability. The S&P statement says that even if Bulgaria were not to accede to the euro area in 2025, its accession would likely be delayed only to Jan. 1, 2026.

Notwithstanding an aging and declining working-age population, Bulgaria's economy has strong growth prospects over the next few years, S&P noted. The agency projects real GDP growth at slightly below 3% on average during 2025-2027, backed primarily by domestic demand expansion. Consumption will remain strong amid a resilient labor market with near-record-low unemployment levels and positive real wage growth. At the same time, ample EU funds will underpin investment activity for several years. S&P estimates available grants and loans to Bulgaria under the EU's 2021-2027 Multiannual Financial Framework and Next Generation EU at about a substantial 29% of forecasted 2024 GDP.

Bulgaria has one of the strongest fiscal track records in Central and Eastern Europe, the agency noted, adding that the country’s current fiscal plans will result in deficits below 3% of GDP through 2027, keeping debt, net of liquid government assets, at about 20% of GDP by 2027. The agency expects the current account deficit to remain a narrow 1% of GDP on average and to be overfunded by EU funding and foreign direct investment inflows.

The S&P statement says that the ratings can be raised over the next two years, potentially by several notches, if Bulgaria becomes a euro area member. S&P could revise the outlook to stable if the prospect of Bulgaria joining the euro area becomes less likely.