Moody’s affirms Bulgaria’s Baa1 rating, sees euro zone delay

Moody’s credit ratings agency has affirmed the long-term foreign and local currency sovereign credit ratings on Bulgaria at ‘Baa1’ with a stable outlook, but said that the country’s adoption of the euro was “likely to be delayed at least until 2025.”

Bulgaria failed to meet the Maastricht convergence criteria for joining the euro zone due to high inflation in 2022, which reached 16.9 per cent.

“Moody’s estimates that Bulgaria is currently even further away from meeting the price stability criterion for euro adoption than last June, while the country’s protracted political deadlock also jeopardises the prospect of euro adoption already in 2024,” the credit ratings agency said.

The ratings agency also said that Bulgaria’s “protracted political deadlock increasingly risks having a tangible negative effect on the government’s ability to make progress on key policy priorities.”

“Aside from increasing the risk of a prolonged delay to euro adoption, the absence of a stable governing coalition will complicate progress towards meeting the policy milestones necessary to unlock further tranches of funding under the EU’s Recovery and Resilience Facility in 2023 and beyond,” Moody’s said.

But despite being governed by a caretaker Cabinet for most of last year, Bulgaria was successful in securing alternative natural gas delivery routes after being cut off from Russian gas supplies by Gazprom in April 2022, the agency said.

Moody’s said that the energy and economic slowdown caused by Russia’s invasion of Ukraine was “a significant economic shock to Bulgaria”, but the agency noted that it did not “expect that the energy crisis will cause significant lasting economic scarring on the Bulgarian economy.”

“The windfall gains of state-owned energy utilities from exporting electricity at elevated market prices have also helped fund one of the most generous energy price subsidy schemes for non-household consumers in Europe, which has also supported the broader resilience of Bulgaria’s industry and manufacturing sector in the current crisis,” Moody’s said.

The credit ratings agency estimated Bulgaria’s economic growth at 2.7 per cent in 2022 and forecast a slowdown to 1.4 per cent in 2023.

Moody’s Baa1 sovereign rating on Bulgaria is the highest among the three major credit rating agencies, one step above the current BBB ratings by S&P Global and Fitch, which are equivalent to Moody’s Baa2 rating.

(Photo: Steve Ford/

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