S&P: Bulgaria ratings reflect strong fiscal, demand management policies

Standard & Poor’s Ratings Services said it has affirmed its BBB+ long-term and A-2 short-term foreign and local currency sovereign credit ratings on Bulgaria. The ratings on Bulgaria reflect the government’s strong track record of coordinating fiscal and demand management policies, the subsequent sustained reduction in the public debt burden, solid growth prospects in the medium term, a relatively strong external balance sheet, and the country’s recent EU accession. «The 2007 budgetary surplus is expected at around 3.5 percent of GDP, which will contribute to a sustained decline in gross debt,» Standard & Poor’s credit analyst Marko Mrsnik said. Bulgaria’s high current account deficit, expected at above 20 percent of GDP in 2007, is fully covered by net foreign direct investments. While the overfinancing of the current account gap stimulates inflationary growth of the monetary base via the currency peg, high FDI coverage dampens the buildup of external debt. «Continued fiscal prudence, improvements in inflation, especially a clear moderation of wage pressures, and a narrowing of the external imbalances would underpin the current ratings on Bulgaria,» Mrsnik said.