The international rating agency Moody’s upgraded yesterday Bulgaria’s foreign currency bond and deposit ceilings as well as foreign and local currency bond ratings by one notch to Baa3/P-3. The local currency bank deposit ceiling was raised to Baa1 -- two ranks higher than the other ratings. The outlook on all positions was defined as stable. The agency has put the country on rating watch for possible upgrade several months ago. Although Moody’s now sees Bulgaria in the lower part of the investment grade scale, its assessment remains below the marks given by Standard &Poor’s and Fitch, each of them ranking Bulgaria’s foreign currency debt at BBB or one notch higher than Moody’s.
The upgrade operated by Moody’s is explained by “significant improvements in key areas and the short-term prospects for EU accession.” The agency underlines that the likely EU accession next year should consolidate past improvements and support continuation of reforms. As all other rating agencies, Moody’s praises growth and fiscal achievements resulting into rapid public debt reductions but warns of external balance risks related to the large CA deficit and high external debt in the private sector. The bank sector is considered strong and well supervised which is also seen from the high ceiling on the local currency bank deposits. Moody’s concludes that external imbalances make the country vulnerable to shocks and sudden changes of investment sentiments but finds little probability of any destabilizing scenarios, as the government and the banking system “seem sufficiently robust to withstand the resulting instability in a manner consistent with a Baa-rated country.”