The international rating agency S&P Global Ratings confirms 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 Ministry of Finance.
From the rating expectation that the military conflict Russia-Ukraine will cause a shock to the economic economy and therefore the real agency of GDP in 2022 will slow to 1.6% from 4.3% (in their November forecast), the budget deficit will double to 5% of GDP. S&P notes that Bulgaria’s strong external and fiscal balances will help mitigate this shock, and a stable EU inflow will support the transfer in the medium term.
The stable outlook for accounting for S&P’s profits is that the economic economy will not suffer major external or fiscal imbalances. Rather, the shock to the economy, due to the military conflict, will be temporary and economic growth 2 will intensify from 023, supported by the inflow of transfers from the EU. S&P expects this to limit the growth of consolidated government debt, which will remain low internationally.
According to S&P, the Bulgarian economy will be the result of a conflict in Ukraine due to high inflation, which will lead to a reduction in disposable income, lower confidence in business and consumers in the country, and side effects resulting from lower economic activity of the country’s most important trading partners in the EU. The rating agency estimates that the situation is assessed by the interrupted gas supplies from Russia to Bulgaria, remains manageable due to the ongoing efforts to diversify the supply and keep gas reserves, which are low, but still sufficient.
However, S&P believes that high and rising inflation rates are an opportunity for governance. Pressure on public finances is increasing, but net government debt remains below 20% of GDP and provides ample room for policy.
S&P also notes that external management risks, although the biggest are current account deficits amid rising storage and energy prices and a slow recovery in the tourism sector. The rating agency expects that in the period up to 2025, the inflow of funds from the previous and current EU Multiannual Financial Framework, as well as additional funds under the new EU Next Generation instrument, will provide a solid basis for strengthening economic growth.
The rating agency would raise the credit rating upon the country’s accession to the eurozone, as well as a significant improvement in the current account balance. S&P notes that it may downgrade, in the event of military conflicts in Ukraine, limiting Bulgaria’s economic growth in the medium term.