S&P Global Ratings revised the outlook on Bulgaria’s BBB+ credit rating to stable late on November 13, citing “growing twin deficits” as one of the reasons for its decision.
The credit ratings agency had changed the country’s outlook to positive in May, shortly after Roumen Radev was sworn in as Prime Minister, due to expectations of improved political stability, given Radev’s Progressive Bulgaria majority in Parliament.
Six months on, S&P Global said it was prompted to change the outlook back due to widening Budget and current account deficits. “The stable outlook also reflects our expectation that a timely policy response will cause economic overheating to gradually subside,” the credit ratings agency said.
Since its previous ratings decision, S&P said that it has revised its estimate of Bulgaria’s Budget deficit this year to 5.1 per cent of GDP, noting that expected the fiscal consolidation to be gradual, with the deficit reaching the EU-mandated three per cent in 2029.
“The current account deficit has also weakened more than we expected, as export performance has been weak while strong domestic demand and the spike in energy prices pushed imports up,” S&P said.
The credit ratings agency also said that high wage growth, domestic credit, and house price inflation growth all pointed to an overheating economy with growing imbalances.
S&P Global did not adjust its projections of Bulgaria’s economic growth, maintaining its forecast of an average of 2.6 per cent over 2026-2029.
The fiscal deficit was the main threat to Bulgaria’s credit rating, S&P Global saying that it could “the ratings if budgetary consolidation efforts were to stall, for instance due to difficulties containing expenditure growth amid ongoing resistance to permanent tax increases.”
On the upside, a ratings increase was possible if Bulgaria’s external imbalances were to ease, particularly if the current account deficit were to move to a lower level on a sustainable basis, the ratings agency said.
(Photo: Haydn Blackey/flickr.com)
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