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S&P: With a stable government, Bulgaria will not delay the euro

by AI | 27.May 2024 | Europe in brief AI

According to the rating agency, the country will join the Eurozone by January 1, 2026.

Photo: BTA, Milena Stoykova

SOFIA – The international agency Standard & Poor’s confirmed the credit rating of Bulgaria and the positive outlook, reported the Bulgarian Ministry of Finance.

The agency notes that if a stable government is formed quickly after the elections in June and instability is avoided, there is not expected to be any significant delay in the country’s accession to the Eurozone.

Bulgaria still does not meet the inflation size requirement to introduce the single currency. The rating agency believes that even if Bulgaria does not join the Eurozone in 2025, it will likely only be postponed until January 1, 2026.

Bulgaria’s economy has strong growth prospects for the next few years, notes the agency. It forecasts real GDP growth averaging just under 3% in 2025-2027, supported mainly by increased domestic demand. At the same time, sufficient EU funds will support investment activity for several years. The rating agency estimates EU funds available to Bulgaria until 2027 at around 29% of the forecasted GDP for 2024.

Bulgaria shows some of the best fiscal results among the countries of Central and Eastern Europe, and the rating agency estimates that the current fiscal plans will lead to a deficit below 3% of GDP by 2027, while maintaining the debt, net of liquid state assets, around 20% of GDP by 2027. It is also expected that the current account deficit will remain around 1% of GDP on average and will be overfunded by EU funds and inflows of foreign direct investment.

Standard & Poor’s notes that it may raise the rating in the next two years, probably by several notches, if Bulgaria joins the Eurozone.

According to the Governor of the Bulgarian National Bank Dimitar Radev, the country has the opportunity to introduce the euro in 2025. The banking sector will be fully ready by the end of the year for the introduction of the common European currency, he commented.

The BNB Mint began trial minting of 8 million Bulgarian euro coins, and euro banknotes for local needs are also being printed, Radev announced in mid-May. He added that Bulgaria will not meet the inflation size requirement by June, when the European Commission’s report is expected, but it is planned that in the fall, inflation in Bulgaria will stabilize within the set limits. The Bulgarian government intends to request an additional report before the end of the year, in which the fulfillment of the last requirement will be noted. (25.05.2024)