22.12.2010

The rating agency Moody\'s Investors Service updated its assessment of Bulgaria\'s economic situation. The credit rating is affirmed at Baa3, with positive outlook.

The outlook on the ratings was changed from stable to positive in January 2010, reflecting Bulgaria\'s good resilience to the global crisis. The rating agency believes that growth should resume, boosted by aid from the EU.

Moody\'s indicates the strengths of Bulgaria, namely the EU membership which provides financial support and incentives for reforms, as well as prudent fiscal policy, low government debt and track record of maintaining sizeable fiscal reserves. With a consolidated government debt to GDP ratio of 14%, Bulgaria is the third least indebted country in the EU after Estonia and Luxembourg.  

Moody\'s Investors Service says that an upgrade of Bulgaria\'s ratings is contingent upon fiscal consolidation, improved budgetary transparency, and the re-emergence of a sustainable economic growth. Indications that economic convergence would lead to ERM II entry would also be ratings supportive.

The current account deficit shifted into a small surplus in January-October 2010 as the trade deficit more than halved and the services surplus expanded. The balance of payments remained in deficit due to the drop in FDI and other capital inflows on the one hand, and the large repayments of external loans on the other hand. Given the external factors and the lack of flexibility posed by the currency board arrangement, reducing the current account deficit would be an important support for long-run macro stability, the rating agency further pointed out in its analysis.