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Moody’s expects 2.7% growth in our economy in 2021. PHOTO: Pixabey
One of the main reasons is our entry into the eurozone waiting room.
Credit agency Moody’s raised Bulgaria’s long-term credit rating in foreign and local currency to Baa1 with a stable outlook. This was announced by the Ministry of Finance.
Among the reasons for the credit agency to raise the rating are mainly Bulgaria’s progress towards joining the euro zone, after our country entered the ERM-2 exchange rate mechanism in early July. Another reason is the strengthening of the country’s fiscal and credit profile despite the negative impact of the COVID-19 pandemic.
Analysts assess our entry into the so-called waiting room as one of the last decisive steps before our accession to the euro area, as our approval in the context of the crisis is the result of a comprehensive reform program. Moody’s also highlighted the close cooperation between the European Central Bank and the BNB in the field of banking supervision, which they believe will further contribute to improving the regulatory environment and encourage the adoption of best practices.
According to the agency, the highly reliable currency board mitigates the risk derived from the high share of the country’s foreign currency-denominated debt (in 2019, 80% of Bulgaria’s public debt is denominated in euros).
The country’s credit profile is supported by our strong fiscal position, and the debt-to-GDP ratio reached 20.4% in 2019, which is the second lowest level in the EU after Estonia, Kiril Ananiev’s office said.
There has also been an improvement in terms of more favorable financing opportunities, with the ratio of interest payments to budget revenue falling to 1.5% in 2019 from 2.5% in 2016. Moody’s also expects the fiscal reserve to remain stable at around 10 % of GDP.
The Agency estimates a fall in GDP of 3.5% in 2020, followed by a recovery of 2.7% in 2021. The expected fall and the need to support economic activity will lead to a deficit of 3% of GDP in 2020 and 1.6% in 2021. Moody’s expects public debt to increase to 23.9% in 2020 and 24.2% in 2021, and then gradually decrease to 23.5% in 2022.
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