Moody’s Investors Service assigned a provisional unsecured (P)Baa2 rating to Bulgaria’s EUR 8 B Global Medium Term Note (GMTN) programme on Friday.

The rating reflects the country’s weak economic growth outlook in an environment of moderate credit expansion and persistent unemployment.

The rating also takes into account the challenges to the banking system, the high fiscal strength, the low government debt and a record of maintaining fiscal reserves.

Moody’s assesses Bulgarian economic performance as being weak since the start of the financial crisis due to decreased demand for exports from its main trade partners.

Other factors contributing to this include a slowdown in investments and sluggish competition.

However Bulgaria has a strong fiscal discipline, recording second lowest debt-to-GDP in the EU in 2013.

The credit rating agency notes the challenges to the banking system presented by the collapse of Corporate Commercial Bank (KTB) in the summer of 2014.

The collapse of KTB resulted in the loss of BGN 4.2 B and the revocation of its banking licence.

Moody’s points that Bulgaria’s entry into the European Exchange Rate Mechanism (ERM II) could exert positive pressure on its government bond rating and GMTN rating.

The decrease in the share of external debt and deposits denominated in foreign currency and a structural reform process could also have positive influence on the rating.

Read the full report here.

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