In its annual report on Bulgaria, Moody’s Investors Service says the country’s Baa3 government bond rating and positive outlook are a reflection of the country’s improved resiliency in the decade since the economic crisis and sovereign default in 1997. The foreign currency country ceiling is A1. «The economy has stabilized, growth has been strong and output has diversified,» said Moody’s vice president Kenneth Orchard, author of the report. «The ratings are underpinned by a prudent fiscal policy and low and declining debt levels.» He said European Union membership, achieved at the beginning of 2007, has provided important technical and financial support and facilitated European integration. «The ratings balance these positive developments against a number of concerns, particularly the existence of a currency board arrangement alongside a large current account deficit and rapid growth in private sector external debt,» said Orchard. The current global financial turmoil has also increased the risk of an external shock causing economic dislocation over the next 12 to 18 months, according to the Moody’s analyst. «However, the increase in macroeconomic risks has been accompanied by a remarkable improvement in the government’s debt metrics,» said Orchard. «Stress-testing indicates that the government and banking system are sufficiently strong to withstand a significant economic or financial shock at the country’s current rating level.» Moody’s report, «Bulgaria: 2008 Credit Analysis,» is a yearly update to the markets and is not a rating action.