14.06.2014

Standard & Poor's Ratings Services lowered its long- and short-term foreign and local currency sovereign credit ratings on the Republic of Bulgaria by one notch to 'BBB-/A-3' from 'BBB/A-2' with stable outlook. The Agency points out as main reason for the revision of the ratings the unstable political situation. According to it the present political environment continues to pose a challenge for the implementation of reforms needed to tackle deep-rooted institutional and economic problems and impedes growth. As a key indicator for insufficient growth is mentioned real GDP growth which according to the Agency averaged less than 1% in 2010-2013. The fiscal flexibility and low levels of deficit and government debt are indicated as strengths supporting the stable outlook and balancing the risks of political instability.

Minister of Finance Petar Chobanov comments the ratings assigned: "The rating agency grounds its decision mainly on its view of continuing instability of the political environment which is only one part of the rating methodology. The assessments of international analysts for stable fiscal variables - deficit and debt - pointed out as the strengths of the policy implemented, are again confirmed. The S&P's experts have not taken account of the positive changes in the current economic environment and the restart of the economy. Growth has started to accelerate since the second half of 2013 due to accelerating domestic demand and better EU funds absorption. The business climate has been improving for six consecutive months and in May has increased by 5.3 pps reaching the average level of the indicator for a 10-year period and reporting its highest level since November 2008. Since the beginning of the year labour market has significantly improved, employment increasing substantially by almost 40 thousand jobs. In Q1 of 2014 unemployment rate remained at its level of the last quarter of the previous year 13% and dropped by 0.8 pps compared to same period of 2013, which happened for the first time since 2009. The positive labour market developments supported also by the increase of real average wage by 4.2% have resulted in an increase of the consumer confidence indicator which in April has reached its highest value since mid-2007."

You can see the Standard & Poor's analysis (in English) HERE.