S&P Global Ratings shifts Bulgaria credit rating outlook to stable

S&P Global Ratings revised the long-term credit rating outlook for Bulgaria from positive to stable. The agency confirmed that Bulgaria's long-term and short-term credit ratings in both foreign and local currency remain at BBB+/A-2. This shift in outlook reflects worsening fiscal and external sector indicators alongside signs of economic overheating, according to S&P Global Ratings.

Fiscal and external sector projections

The revision comes amid specific projections for the Bulgarian economy over the next several years. The 2026 budget deficit is projected at 5.1% of GDP. Economic officials forecast a gradual consolidation of this deficit to 3.0% by 2029. However, the current account deficit is expected to reach 8.7% of GDP in 2026. For the period spanning 2027 to 2029, the current account deficit is projected to average 7.0% of GDP.

The current account deficit is being driven by weak exports and strong domestic demand combined with rising energy costs. S&P Global Ratings stated that the credit rating could be downgraded if fiscal consolidation efforts are delayed or if private sector credit growth experiences an unexpected contraction.

Economic growth and domestic trends

Bulgaria's GDP is projected to grow by 2.8% in 2026. This growth is attributed to consumption and investment funded by the European Union. For the 2027–2029 period, the projected average real GDP growth is 2.6%.

Domestic economic indicators show significant movement in wages and credit. Private sector nominal wage growth was 11.7% during the first six months of 2026, a level that has been maintained since 2023. Additionally, private credit growth for households reached 21.0%, which was primarily driven by mortgage loans. Real estate prices also saw an increase of 15.5% for the period ending in June 2026.

Institutional outlook and risks

The change in the credit outlook highlights the tension between steady growth and fiscal pressures. While investment and consumption support the projected 2.8% GDP growth for 2026, the widening current account deficit remains a point of concern for international analysts. The agency noted that the outlook change reflects the current state of the fiscal and external sectors.

The ability of the Bulgarian government to manage the projected budget deficit and control the current account deficit will be critical for future rating stability. The agency emphasized that the maintenance of the current BBB+/A-2 rating depends on the successful execution of fiscal consolidation and the management of private sector credit expansion.

Glossary

• budget deficit — A budget deficit is a financial state where spending exceeds revenue. It can be managed through fiscal consolidation efforts.
• GDP — GDP is a measure of economic growth. It can be used to project the economic performance of a country.
• current account deficit — A current account deficit occurs when a nation's imports exceed its exports. It can be driven by factors such as weak exports, strong domestic demand, and rising energy costs.
• real GDP growth — Real GDP growth is the rate of economic growth for the gross domestic product. It is a measure of the projected increase in a country's economic output.
• mortgage loans — Mortgage loans are a type of credit used by households. They can drive private sector credit growth.