SOFIA, June 2 Ratings agency Standard & Poor's
upgraded the outlook on Bulgaria's sovereign credit rating to
positive from stable on Friday, mainly due to the Balkan
country's recovering economy and solid fiscal performance.
S&P affirmed Bulgaria's long-term sovereign credit rating at
BB+, one notch below investment grade, but said it could also be
upgraded over the next 12 months if Sofia kept reducing its
macroeconomic vulnerabilities and acted to further decrease the
level of non-performing loans.
"The outlook revision reflects our expectation that
Bulgaria's fiscal and external metrics will continue to improve
and that the authorities will take further steps to strengthen
Bulgaria's financial sector," it said in a statement.
Another upgrade trigger could be Bulgaria's admission into
the European Union's exchange rate mechanism (ERM-2), commonly
known as the euro's waiting room, the agency said, noting that
political hurdles to the process were still high.
"We might also raise the rating if Bulgaria was granted
entrance to the ECB's ERM II monetary framework, which we think
would further bolster policy credibility. Still, we expect this
decision could be delayed for several more years," it said.
Bulgaria meets the formal criteria to adopt the euro, but
western diplomats and bankers say it needs to align its economy
closer to its wealthier EU peers before it can join the euro
Earlier on Friday, Finance Minister Vladislav Goranov said
an entry into the ERM-2 would be an acknowledgment of Bulgaria's
Goranov has said strong domestic demand and exports can
boost the economic growth above last year's 3.4 percent.
Bulgaria targets a fiscal deficit of 1.4 percent of GDP for
this year and plans to balance its budget by 2020. It ended 2016
with a fiscal surplus of 1.6 percent of GDP.
On Thursday, Central Bank Governor Dimitar Radev told
Reuters in an interview that the bank was working on a plan to
further reduce bad loans that have dropped to 12.6 percent of
all loans at the end of March from 14.5 percent at the of 2015.
Credit ratings agencies Fitch and Moody's keep Bulgaria's
sovereign ratings at investment grade at BBB- and Baa2,
respectively. Both maintain stable outlook.
(Reporting by Tsvetelia Tsolova; Editing by Tom Heneghan)