Moodys Investors Service said on Tuesday 5th April that it has placed Bulgaria's Baa3 government rating under review for a likely upgrade, reflecting the country's healthy government finances and ongoing improvements in institutional strength.
The economic outlook has been positive since January 2010 and the move from Moodys comes thanks to the government's strong balance sheet, a prudent budget reserve and expectations it will soon bring its deficit below the European Union's 3% limit.
Given the importance of maintaining low debt, a key focus of the review will be in the area of public finances. In this context, Moodys will examine the government's medium-term budget strategy as outlined in its forthcoming submission of its Convergence Programme to the European Commission. In particular, the rating agency will monitor the debate surrounding the new fiscal rules in order to ascertain whether envisaged restrictions will preserve low government debt without compromising its fiscal flexibility.
The agency will also evaluate the ongoing discussions concerning reforms to the pension system, where the goals are to expand working lives and to further develop private pension savings in order to strengthen and deepen the domestic capital market.
Moodys said it will also seek to evaluate how strong Bulgaria's macroeconomic stability might be in the face of current Greek fiscal and economic isssues crisis, or to other external factors that could put the government finances and economy under strain.
Although Bulgarian banks, which are 82% foreign-owned, are well-capitalized and liquid despite relatively high non-performing loans, Moodys review will look at whether the prospects for growth are likely to be constrained because of the 30% ownership by Greek financial institutions within the banking system.
The economic outlook has been positive since January 2010 and the move from Moodys comes thanks to the government's strong balance sheet, a prudent budget reserve and expectations it will soon bring its deficit below the European Union's 3% limit.
Given the importance of maintaining low debt, a key focus of the review will be in the area of public finances. In this context, Moodys will examine the government's medium-term budget strategy as outlined in its forthcoming submission of its Convergence Programme to the European Commission. In particular, the rating agency will monitor the debate surrounding the new fiscal rules in order to ascertain whether envisaged restrictions will preserve low government debt without compromising its fiscal flexibility.
The agency will also evaluate the ongoing discussions concerning reforms to the pension system, where the goals are to expand working lives and to further develop private pension savings in order to strengthen and deepen the domestic capital market.
Moodys said it will also seek to evaluate how strong Bulgaria's macroeconomic stability might be in the face of current Greek fiscal and economic isssues crisis, or to other external factors that could put the government finances and economy under strain.
Although Bulgarian banks, which are 82% foreign-owned, are well-capitalized and liquid despite relatively high non-performing loans, Moodys review will look at whether the prospects for growth are likely to be constrained because of the 30% ownership by Greek financial institutions within the banking system.
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