site.btaStandard&Poor's Affirms Bulgaria's Credit Rating, Outlook is Stable

Standard&Poor's affirmed Bulgaria’s BBB/A-2 long- and short-term foreign and local currency sovereign credit ratings. The outlook is stable, the Bulgarian Finance Ministry said Saturday reporting the agency’s rating action.

S&P expect Bulgaria's GDP growth to weaken significantly in the coming months. Although this country’s economy exceeded S&P’s expectations against the backdrop of the sequences of the Russia-Ukraine conflict, several challenges lie ahead. External demand from Bulgaria's main trading partners in the EU is expected to decline. Consumption is also expected to weaken as the high inflation, which is estimated at nearly 10% on average in 2023, will weigh on actual wages. EU-funded projects will have a positive impact on Bulgaria's economy, providing some support. S&P Global Ratings forecasts real economic growth for this country of less than 1% in 2023, a significant slowdown, compared to their expectation of 3% in 2022.

Bulgaria is currently experiencing high inflation, which according to S&P could pose a challenge to its accession to the eurozone from 2024. Bulgaria’s successful accession to the eurozone will eliminate residual currency risk against the euro in the economy, improve the country's access to European capital markets and allow local commercial banks direct access to the European Central Bank resources. However, Bulgaria’s current high inflation (nearly 15%) could complicate the task of meeting the convergence criteria for this indicator in 2023. Domestic political uncertainties could also complicate this country’s accession process.