S&P Global re-affirms Bulgaria’s BBB credit rating, positive outlook
S&P Global Ratings has re-affirmed its long- and short-term foreign and local currency sovereign credit ratings on Bulgaria at ‘BBB/A-2’, as well as its positive outlook, owing to “at least a one-in-three likelihood” that the country was set to join the euro area in the near future.
“We think that Bulgaria is on track to join the eurozone early next year,” the credit ratings agency said late on May 23. It noted that Bulgaria’s 12-month average inflation stood at 2.7 per cent as of April, implying that it would meet the price stability criterion for euro zone accession.
Bulgaria formally requested the European Commission and European Central Bank (ECB) to assess the country’s readiness to join the euro area earlier this year. Those convergence reports are due to be published on June 4 and a decision on Bulgaria’s accession to the euro zone would be made by the European Council and current euro zone members in July.
“Renewed domestic political instability could delay the process, but we think that such risks have decreased,” S&P said. “Recent surveys indicate mixed public support for euro area entry. This is in line with previous member states – including Croatia – where public support post EMU entry has generally exceeded support in the run-up to euro accession.”
The credit rating agency said that Bulgaria’s government, formed in January, had a shared objective of euro zone accession, but noted the risk of “another election round in 2026.”
Despite these risks, Bulgaria’s economy has shown relative resilience, and its low direct trade exposure to the U.S. meant that any tariffs imposed by Washington on the EU would primarily affect Bulgaria indirectly through reduced demand from its largest trading partners, particularly Germany and Romania.
S&P Global projected Bulgaria’s economic growth at 2.4 per cent this year, above the two per cent estimate by the European Commission in its spring forecast released earlier this week, but below the 2.8 per cent target set in Bulgaria’s 2025 Budget framework.
Growth was constrained in part by the lack of structural reforms and weak absorption of EU funds, the credit ratings agency said, but despite the long-term structural challenges, the near-term outlook for Bulgaria’s economy remained steady.
Going forward, S&P Global re-iterated that it could raise Bulgaria’s credit ratings if it were to join the common European currency, as that would both improve access to capital markets and monetary policy effectiveness.
On the downside, the outlook could be downgraded if the prospect of Bulgaria joining the euro zone became remote, either as a result of another lengthy period of political gridlock or if inflationary pressures were to re-emerge.
(Photo: Haydn Blackey/flickr.com)
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