Economic Diversification, Govt Finances Health Support Bulgaria’s Rating – Moody’s

On the other hand, the rating is constrained by the financial risks arising from the economy's extensive 'euroisation' and the currency peg, as well as economic event risks stemming from the country's close ties with Greece, Moody's said in its annual credit report.

"Moody's 'moderate' assessment of Bulgaria's economic strength reflects the economy's relatively small size at approximately $51 billion and average incomes that rank in the very middle of incomes globally. Ongoing and gradual diversification is reducing the economy's concentration in natural resource-based exports, which should improve its stability and reduce its cyclicality,” the agency said. “However, average wealth levels are less than half the euro area average despite structural reforms undertaken to gain EU membership and strong levels of foreign direct investment and other capital inflows, which drove rapid income growth in the years leading up to the global financial crisis.”

GDP growth is likely to be offset by continued pressure to increase social spending, according to Moody’s.

“The electorate has become increasingly disgruntled with austerity measures, and voter disenchantment has been expressed through street demonstrations in recent months. Although such public pressure may slow the pace of fiscal consolidation and force early parliamentary elections, all the major parties remain committed to prudent fiscal policies," the rating agency concluded.