The international rating agency S&P Global Ratings confirmed the long-term and short-term credit rating of Bulgaria in foreign and local currency BBB/A-2. The outlook for the rating remains stable.
According to the rating agency, the economic consequences of the pandemic are manageable, despite the significant health impact. Recovered domestic demand, especially private consumption, and increased absorption of EU funds will raise growth prospects in the medium term. The funds allocated to Bulgaria from the previous and current EU Multiannual Financial Framework, as well as the additional funds under the new instrument "Next Generation EU", which the country will have at its disposal, are estimated at about 40% of the expected GDP in 2021.
In line with global trends, S&P reports that inflation in Bulgaria has risen in 2021 due to the combined impact of rising food prices, energy, and increased domestic demand, which affects core inflation. The increase in prices should decrease in the second half of 2022.
The rating agency also reports positively on the inclusion of the Bulgarian lev in the Monetary Mechanism II and Bulgaria's accession to the Banking Union in 2020. The GDP per capita, which is moderate compared to world standards, is assessed as a limitation to the rating and remaining structural and institutional barriers.
The stable outlook reflects the expectation that Bulgaria's economic recovery will intensify over the next two years, supported by further absorption of EU funds. Although some fiscal support measures will be continued in 2022, the rating agency expects budget deficits to shrink over the next two years, which will keep public debt low. The stable outlook for the rating also reflects expectations that the economy will not be exposed to imbalances in the external or financial sector.
The full press release of S&P Global Ratings can be found here.
