Bulgarian Debt Rating Cut by S&P on ‘Volatile’ Politics

Bulgaria’s credit rating was cut by Standard & Poor’s, which said a “volatile” political backdrop is testing the country’s ability to overhaul its economy.

S&P lowered the long-term sovereign rating one level to BBB- from BBB, leaving the eastern European nation one step above junk and on par with Russia and South Africa. The ratings company assigned a stable outlook. Bulgaria’s debt is rated Baa2 by Moody’s Investors Service and BBB- by Fitch Ratings.

“Bulgaria’s political environment continues to pose a challenge for the implementation of reforms needed to tackle deep-rooted institutional and economic problems,” S&P analysts led by Aarti Sakhuja said in an e-mailed statement from London. “Absent meaningful reform progress, we expect growth to remain lackluster and unemployment high.”

The Socialist government of Prime Minister Plamen Oresharski came to power a year ago after anti-austerity protests forced out his predecessor, Boyko Borissov, triggering early elections. Oresharski’s minority cabinet is under pressure to resign after a poor showing at May 25 European Parliament elections. The premier survived a fifth no-confidence vote today.

Bulgaria’s economy expanded 1.2 percent from a year earlier in the first quarter, the same pace as the previous three months, according to the statistics office. The government plans to sell Eurobonds worth 1.5 billion euros ($2 billion) this year to repay $1.1 billion of international debt due Jan. 15 and maturing domestic debt.

Global bond yields showed investors ignored 56 percent of Moody’s and 50 percent of S&P’s rating and outlook changes in 2012, more often disagreeing when the companies said governments were becoming safer or more risky, data compiled by Bloomberg show.

Before it's here, it's on the Bloomberg Terminal.