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Announcement:

Moody's issues annual credit report on Bulgaria

Global Credit Research - 28 May 2012

London, 28 May 2012 -- In its annual credit report on Bulgaria, Moody's Investors Service says that the country's Baa2 government bond rating and stable outlook reflect its moderate levels of economic and institutional strength as well as high government financial strength, which contribute to the country's moderate susceptibility to event risk.

Moody's report is an annual update to the markets and does not constitute a rating action. The rating agency determines a country's sovereign rating by assessing it on the basis of four key factors -- economic strength, institutional strength, government financial strength and susceptibility to event risk -- as well as the interplay between them.

The moderate assessment of economic strength reflects a mid-sized economy of approximately USD54 billion and average incomes that are in the very middle of incomes globally, plus an increasing diversification of economic activity. As a consequence, the concentration in natural resource-based exports is declining, which should improve the economy's stability and reduce its cyclicality. Although structural reforms undertaken to gain EU membership plus strong foreign direct investment (FDI) and other capital inflows drove rapid income growth in the years leading up to the 2008-09 global financial crisis, average wealth is less that 50% of the euro area average. The government's National Reform Programme sets an ambitious goal of raising Bulgaria's standard of living to 60% of the euro area average by 2020.

Moody's assesses Bulgaria's institutional strength as moderate, as its capacity was strengthened in the process of EU accession and as the macroeconomic policy framework has been fairly predictable for some time. Nonetheless, Bulgaria's government effectiveness and particularly the rule of law score rather low on international surveys conducted by the World Bank, due to the need to further tackle corruption.

Moody's considers the government's financial strength to be high based on its healthy finances, with low debt compared with its peers in the euro area. The general government deficit shrank to 2.1% of GDP in 2011 (compared with the Maastricht limit of 3% of GDP) from 3.1% in 2010, a trend that has strengthened market confidence despite the intensification of the euro area debt crisis late last year and the integration of the Bulgarian and Greek economies and banking systems. The government expects the deficit to fall to 1.6% of GDP in 2012, compared with Moody's forecast of around 2%. Moody's is not as optimistic as the government given still-high unemployment, anaemic expansion in industrial output (which will contain the rise in income from spending-related taxes, household incomes and company profits), and as import demand is likely to remain subdued (limiting the growth in import-related revenues).

Susceptibility to event risk is judged as moderate, which mainly reflects the economy's extensive euroization, the significant presence of Greek-owned financial institutions in the local banking system, high external debt and weak external liquidity, which pose risks in the highly unlikely event of a change in the monetary policy regime (the currency board arrangement -- CBA -- in which the lev has been pegged to the euro at roughly 2 per euro since 1997).

Moody's annual credit report on Bulgaria is now available on www.moodys.com.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Kilbinder Dosanjh
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Bart Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's issues annual credit report on Bulgaria
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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© 2013 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
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