The international rating agency S&P Global Ratings has upgraded Bulgaria’s credit rating outlook from stable to positive. The “BBB-/A-3” long- and short-term foreign and local currency sovereign credit ratings on Bulgaria have been affirmed.

The positive outlook signifies that domestic financial conditions have been successfully improved and fiscal and external buffers have strengthened. The analysts of S&P Global Ratings expect strong economic growth to continue, on the back of expanding exports and supportive credit conditions. Net general government debt will continue to decline during 2018, for the fourth consecutive year. External leverage is assessed as low and the current account will remain in surplus. The expectations of the Agency are that policy continuity will be ensured as long as the ruling coalition remains stable.

According to S&P Global Ratings the main factors that would lead to raising Bulgaria’s credit ratings over the next 12-24 months include the further reductions in the level of non-performing loans (NPLs) in the banking sector, combined with additional progress on normalizing the credit channel, which should benefit economic growth.

Ratings could also be positively influenced if the fiscal performance strengthens beyond the current projections of the Agency as well as if the Bulgarian lev joins the exchange rate mechanism (ERM II), which would further bolster policy credibility.

The rating agency could revise the outlook to stable if pressures on the country’s balance of payments emerged, fiscal buffers weakened, or if the declining trend in NPLs reversed.

This could also occur in case the real effective exchange rate rapidly appreciated, which would lead to loss of competitiveness and deterioration in Bulgaria's external position.

You can find the full text of the press release of S&P Global Ratings here.