S&P Global Ratings raised Bulgaria's long- and short-term foreign- and local-currency sovereign credit ratings to BBB-/A-3 from BB+/B, citing the country's improving external metrics. The outlook on the ratings was stable.
The rating agency said Bulgaria's strong external performance is supported by multiyear export growth, amid a rise in domestic savings.
Bulgaria's export base has widened and diversified in the past few years as the country is being increasingly integrated into EU manufacturing supply chains, S&P said. In 2017, exports account for an estimated 65% of GDP, up from 50% in 2010.
S&P expects Bulgaria to have another strong current account surplus at around 3% of GDP in 2017. The rating agency still sees export growth remaining sound even if the current account surplus is projected to narrow gradually and shift into deficits in 2020.
Another rating upgrade could be issued over the next 24 months due to a strengthening economic recovery, further reductions in the banking sector's nonperforming loans, and stronger-than-expected government fiscal performance. The re-emergence of balance-of-payments pressures or weakening growth or deteriorating fiscal performance could trigger a downgrade.
Fitch Ratings also raised Bulgaria's long-term foreign- and local-currency issuer default ratings to BBB from BBB- with stable outlooks.
Fitch said the rating upgrade reflects Bulgaria's strengthening economy, net external creditor position, and sovereign external buffer as well as its improving government budget balance and declining debt.
The economy is forecast to grow 3.6% on average from 2017 to 2019 after average growth of 1.1% from 2010 to 2014, according to Fitch.
Stronger medium-term GDP growth could lead to a positive rating action, Fitch said, while higher fiscal deficits and re-emergence of external imbalances, such as prolonged widening of the current account deficit, could result in a negative rating action.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
