S&P Global revises outlook on Bulgaria ‘BBB+’ credit rating to positive
S&P Global Ratings revised the outlook on Bulgaria’s BBB+ credit rating to positive late on May 15, citing improved political stability as one of the reasons for its decision.
“The outlook revision primarily reflects the potential for Bulgaria’s medium-term growth to strengthen, given the improved political stability and the new government’s reform plans,” the ratings agency said, referring to the outcome of last month’s parliamentary election.
Former president Roumen Radev’s Progressive Bulgaria electoral coalition won a 131-seat majority in the 240-seat National Assembly, allowing it to govern without the need of entering into a coalition with other parties. Radev and his Cabinet were sworn into office last week.
S&P Global noted that the result ends the political instability that saw eight elections held in five years: “We think that previous policy paralysis now could reverse, given the new government’s plans for reforms, including measures to fight corruption, strengthening the judiciary, and meeting the conditions for EU fund disbursements.”
The credit ratings agency was also optimistic about the impact of war in the Middle East on Bulgaria’s economic growth, attributing it to efforts to diversify Bulgaria’s energy supplies in recent years.
“The majority of domestic electricity generation comes from nuclear, coal, solar, and hydropower sources. Nevertheless, the country continues to depend on imports of foreign oil and refined petroleum products,” the credit ratings agency said.
But while the war will have a negative effect on Bulgaria’s near-term growth – and is certainly impacting inflation, with S&P Global now projecting the full-year average at 5.3 per cent, up from 3.5 per cent – the credit ratings agency said it expected growth to remain “robust”, averaging 2.6 per cent over 2026-2029.
Another positive aspect of Bulgaria’s ratings profile was its entry into the euro area in January, which “implies a deepening in Bulgaria’s integration with European institutions, including access to Eurosystem liquidity support, particularly in times of crisis,” S&P Global said.
Despite Radev’s opposition to military aid for Ukraine and support for “more pragmatic” relations with Russia, S&P Global said that it did not expect Bulgaria’s new government to “take any active steps that could alienate the EU, given the importance of EU Cohesion Policy and NextGenerationEU fund disbursements.”
The end of the recent political instability also could lead to a consolidation of fiscal policy starting next year, after several years of weakened budgetary performance that saw deficits to an average of just over three per cent in 2021-2025, S&P Global said.
The ratings decision is S&P Global’s first since raising Bulgaria’s credit rating by one notch to BBB+ in July 2025, when the country’s euro zone accession was formally approved.
The credit ratings agency said it could further raise Bulgaria’s rating if “growth performance and average per capita income strengthened, bolstered by government reforms and EU fund disbursements.”
A revision of the outlook back to stable some time in the next two years was possible if growth performance was weaker than S&P Global’s projection “for example, because of a more prolonged and significant impact on the economy of the spillover effects from the Middle East conflict or a more detrimental impact from long-term trends such as weak demographics. We could also revise the outlook to stable if the country’s fiscal position materially weakened.”
(Photo: Haydn Blackey/flickr.com)
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