BTA: Scope Ratings Agency Confirms Bulgaria's "A-" Credit Rating, Outlook Stable

The Scope Ratings European Rating Agency has concluded the monitoring of Bulgaria's credit rating and confirms the country's long-term A-/Stable ratings, the rating agency said on its website. The country's short-term ratings are S-1/Stable.

Bulgaria’s A-/Stable ratings are underpinned by the following credit strengths: the country’s upcoming accession to the euro area, with multiple, significant credit positive implications resulting from the use of a global reserve currency; the sovereign’s low level of government debt and a track record of prudent budgetary policy; and robust medium-term growth prospects, underpinned by sizable EU fund allocations and the positive effects of euro adoption.

Credit challenges associate with: institutional weaknesses and recently repeated instances of political instability; moderate income levels and exposure to external shocks, given the Bulgarian economy’s small size and openness; and unfavourable demographic trends and persistent labour shortages, weighing on the long-term macro-fiscal outlook.

Scope expects the Bulgarian economy to continue growing robustly over the medium-term, with real growth expected to reach 3.3% in 2025 and 3.2% in 2026, after 3.4% in 2024. The acceleration in the absorption of Recovery and Resilience Facility (RRF) funds has supported a pick-up in investment, while private demand remains dynamic, benefiting from healthy income growth. Looking ahead, investments are expected to continue driving the growth momentum, as public investment remains strong ahead of the conclusion of the RRF and as private demand benefits from the country’s entry into the euro area.

After remaining broadly stable this year at 3.0% of GDP, the general government deficit is forecast to narrow slightly to 2.8% of GDP next year. In 2027, Scope expects the fiscal deficit to increase temporarily to around 4% of GDP, driven by expected defence-related capital investment, before declining to 3.0% in subsequent years. Expenditure growth remains high, driven by pressures on social transfers, public sector wages, and growing allocations to military spending. Scope notes that Bulgaria benefits from flexibility under the EU fiscal framework following the activation of the national escape clause, which allows EU Member States to deviate temporarily from the 3%-Maastricht threshold for additional defence expenditure. "Importantly, the medium-term fiscal outlook is impacted by a degree of uncertainty, following authorities’ decision to suspend the 2026 budget bill amidst high social discontent," Scope said.

"The present legislative landscape is unfavourable to fiscal consolidation but also to political stability, especially once the euro-area accession process is complete," the agency said further. Acknowledging this uncertainty, currently Scope expects the public debt-to-GDP ratio to remain on a steady rising trajectory over coming years, rising from 23.8% at end-2024 to around 28% by year-end 2025 – notably driven by a EUR 2m billion (around 1.8% of GDP) capital injection into the Bulgarian Development Bank, before growing to around 35% by year-end 2030, driven by sustained primary deficits. Still, despite the steady increase, public debt should remain amongst the lowest in the European Union.