Institutional quality and poor business climate are among Bulgaria's main credit challenges, Moody's said on Friday. "Despite recent reforms, aspects of the country's overall institutional quality, notably the control of corruption and the rule of law, continue to show little improvement, with negative implications for Bulgaria's investment rate," the ratings agency said in a press release, announcing its annual credit analysis report on Bulgaria. Other major challenges, according to Moody's, include poor condition of the country's physical infrastructure, high youth inactivity and share of long-term unemployment and adverse demographics. On the upside, Bulgaria is in a strong fiscal position, which reflects its favourable debt-to-GDP ratio compared to EU peers and Baa2 rating peers, as well as the authorities' commitment to gradually consolidating fiscal metrics without impairing economic growth. The country's debt of 25.4% of GDP in 2017 adds fiscal flexibility and shock absorption capacity, Moody's said. The ratings agency expects Bulgaria's debt-to-GDP ratio to steadily decline to around 23% of GDP by 2019.GDP growth is projected at 3.6% over the next two years, supported by domestic demand, and with a negative contribution from external demand as import growth picks up.