S&P Affirms Bulgaria at 'BB+/B', Outlook Stable

Standard & Poor's has affirmed its long-term and short-term sovereign credit ratings on Bulgaria at 'BB+/B', with a stable outlook.

"The stable outlook reflects our view that Bulgaria's fiscal flexibility, arising from still-low general government debt, balances potential risks from the financial sector," the global rating agency said in a statement on Friday.

The Bulgarian government's net debt position, estimated at nearly 20% of 2015 GDP, is moderate which affords Bulgaria fiscal leeway to respond to external and domestic shocks, according to S&P.

The rating agency, however, warned that this fiscal space has shrunk somewhat by an increase in government debt after the government provided support to the banking sector in 2014. At the same time, the country's rating is supported by the moderate level of external indebtedness.

S&P analysts believe that economic growth prospects for 2016-2019 are weaker than last year's expansion of 3%, which was supported by export growth and an acceleration in the absorption of EU funds.  

"With the beginning of a new EU budget cycle, there will be a lag before new public investment projects financed by EU structural and cohesion funds can resume momentum," S&P said.

Bulgaria's energy sector and the banking sector are two sources of contingent liabilities, according to the statement, which is accessible on the website of the Bulgarian Finance Ministry.