Eurozone Entry for Bulgaria Faces Challenges Amid Government Uncertainty
Concerns loom over Bulgaria's potential entry into the eurozone as the nation grapples with political instability in the months ahead
Standard & Poor's has confirmed its long- and short-term foreign and local currency rating on Bulgaria at 'BB +/ B' with stable outlook, the Finance Ministry in Sofia said on Friday.
The rating is supported by low government debt, while the relatively low level of per capita income, weaknesses in governance and worsening demographics are listed at constraints, the ministry said in a press release.
Standard & Poor's expects a gradual improvement of the fiscal position in the medium term.
The global rating agency said it has taken into account Bulgaria’s efforts to strengthen banking supervision and the start of the process to introduce the Directive establishing a framework for the recovery and restructuring of credit institutions and investment intermediaries, which sets the rules for dealing with bank failures, so as to minimize loss to taxpayers.
A risk factor for Bulgaria is the large share of assets in country's banking sector held by Greek banks.
Standard & Poor's also said that it a rating upgrade could take place if the government efficiently addresses the problems of governance, which would help increase the potential for growth and attract more foreign direct investment to export-oriented sectors; or if economic growth rate exceeds forecatss.
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