The international rating and research agency Standard & Poor’s has improved the outlook on the long-term foreign and local currency ratings of the capital city of Sofia to positive from stable. The ratings are affirmed at BB. The agency underlines that the budget performance and accountability in the municipality have been improved last year despite the tight investment transfers from the central government. S&P adds that the extraordinary mayor’s elections in the fall last year have stabilized the political and economic positions of the city.
The analysts however warn that the outlook could be revised downwards in case that the central budget continues to cut investment transfers to Sofia amid rising needs for financing infrastructure projects. The debt of the city is meanwhile expected to rise to 70% of the annual revenues over large costs for rehabilitation and modernization of the transport infrastructure. Sofia generates about 25% of the country’s GDP, according to S&P, and attracts about 60% of all FDI inflows. Although the city is a large net contributor to the central budget, the fiscal redistribution on the side of the central government leaves very limited investment resources as most of the tax receipts are reallocated to municipalities with low economic activity.