Moody’s Bulgaria Rating, Outlook Reflect Moderate Strength

Bulgaria’s Baa2 government bond rating and stable outlook reflect its moderate levels of economic and institutional strength, as well as high government financial strength, Moody’s Investors Service said in a report.

The country has “moderate susceptibility to event risk,” because of “extensive euroization, the significant presence of Greek-owned financial institutions in the local banking system, high external debt and weak external liquidity,” Moody’s said. The annual credit report does not constitute a rating action.

Bulgaria’s sovereign debt is rated BBB by Standard & Poor (SPY), level with Russia and Lithuania, and BBB- by Fitch, level with Romania and Iceland. Moody’s estimates Bulgaria’s budget deficit to reach 2 percent of gross domestic product this year, wider than the government forecast of 1.6 percent, after 2.1 percent last year.

“Moody’s is not as optimistic as the government, given the still-high unemployment, anemic expansion in industrial output,”and as import demand will probably remain subdued, growth of import-related revenue will be limited, according to the statement.

Bulgaria, the European Union’s poorest country in terms of economic output per capita, weathered the global crisis without borrowing from international lenders. The government is working on cutting the budget gap to help contain fallout from the euro debt crisis and raise funds for 835 million euros of debt due in 2013.

“Largely as expected,” said Tim Ash, chief emerging- market economist at Royal Bank of Scotland Group Plc in London, in e-mailed comments today. “Bulgaria’s great strength is its modest public sector debt ratios,” at about 15 percent of GDP and fiscal reserve, about 10 percent of GDP, plus near balanced current-account position, he said.

The government has “a strong cash position to bail out banks if need be,” he said.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at

To contact the editor responsible for this story: James M. Gomez at

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