Moody's: Bulgaria’s Credit Rating Outlook is Positive

Thanks to resilient growth and further tightening of fiscal policy, Bulgaria's credit rating outlook is positive according to Moody’s Investors Service.

Moody’s credit outlook analysts Kristin Lindow and Renzo Merino point out that the tight fiscal policy stance of the Bulgarian government led to the country having the only sovereign rating upgrade in the European Union since the global crisis began in 2007.

"Continued positive growth, as well as fiscal consolidation measures, will help Bulgaria remain one of the very few low debt countries in Europe", the analysts said.

In July of last year Bulgaria's rating was raised to Baa2. However, Moody's has now confirmed that it will most probably review its assessments of the Eurozone countries in the first quarter of 2012 due to the continuing lack of effective measures for tackling the debt crisis.

At the EU summit last week the member states agreed on setting up a tax and budget union but they failed to agree on the issuing of more Eurobonds. Moody's have pointed out that this is likely to have a continuing impact on the Eurozone countries.

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Bulgaria's Economy Rating Upgraded : now Best in Balkans

On July 22, 2011 Moody's upgraded the credit rating of Bulgaria from Baa3 to Baa2 with a stable outlook. This is the first increase of the credit rating of Bulgaria in the last 5 years and the level achieved is now the highest since Moody's started grading the country.

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The increase of Moody's rating distinguishes Bulgaria from other countries in the region. While the rating of Greece was dramatically downgraded during recent months, Bulgaria's rating has moved consistently upwards. Romania's rating has not been increased and is now lower than that of Bulgaria.

In fact, Bulgaria currently has the highest grade rating on the Balkan Peninsula, including those of Greece, Romania, Turkey, Serbia, Montenegro, Albania and Bosnia and Herzegovina. What is more, Bulgaria now has a higher rating than the problematic Eurozone and EU members: Portugal, Greece, Ireland, Latvia and Hungary, which is a reversal in the situation of just a few months ago.

This is the beginning of a process for Bulgaria, which – if brought successfully to an end through sound economic policy – should result in increasing the investment trust in the country, despite the problems of the other countries in the region. As Estonia previously managed to set itself apart from the troubles in the other Baltic countries and achieve a fast and stable recovery of investments and economic growth, Bulgaria has the chance to accomplish such developments in the same manner.

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Bulgaria's economic rating set for upgrade review

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.

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