site.btaMoody's Affirms Bulgaria’s Baa1 Ratings, Maintains Stable Outlook

Moody's Investors Service has affirmed the Government of Bulgaria's long-term issuer and senior unsecured ratings at Baa1, outlook stable, the Bulgarian Finance Ministry reported. 

The affirmation of Bulgaria's Baa1 rating is balanced by three main factors. First, the affirmation reflects the rating agency's expectations that Bulgaria's debt and creditworthiness indicators will remain significantly stronger than those of countries with the same rating. Second, the affirmation also reflects their expectations that the Bulgarian economy will continue to grow at a solid pace in 2025 and in the years ahead, leading to further income convergence with countries in the same rating group. Bulgaria's credit profile will also be supported by the expected adoption of the euro. Third, the strengths are balanced by weakened institutional effectiveness, which is evidenced mostly by the slow and halting progress on key reforms and access to financing under the Recovery and Resilience Plan. At the same time, the weakening of the fiscal position is noted as a risk, as institutional challenges could affect the implementation of policies outside the Recovery and Resilience Plan as well.

Moody’s Ratings expects Bulgaria’s public debt to increase moderately in the coming years, reaching 27% of GDP at the end of 2025 and around 29% at the end of 2026 compared to the expected 24.8% at the end of 2024, and the deficit to remain close to 3% of GDP in 2025 and 2026. Combined with a slowdown in nominal GDP growth, the rating agency expects inflation to normalize to around 2.6% on average in 2025-2026, driving a gradual increase in debt in the coming years. However, Bulgaria’s debt will remain around half that of the Baa1-rated countries.

The rating agency expects Bulgaria’s real GDP to grow by 2.5% in 2025 and 2.7% in 2026. Economic growth will continue to be driven mainly by private consumption, as real wage growth remains high in an environment of significant labour shortages and low inflation.

Although difficulties in absorbing the EU Recovery and Resilience Facility may have a negative impact on growth rates in 2025, and 2026, GDP growth will be supported by increased absorption of EU Cohesion Funds set for the coming years of the 2021-2027 programming period.

The rating agency expects that Bulgaria’s full membership in the Schengen area from the beginning of 2025 will support the tourism and transport services sectors, while improving business conditions for exporters of goods. The prospect of adopting the euro in 2026 would also support further integration with the eurozone economies and strengthen the Bulgarian economy over time.