Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews of an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Bulgaria (BBB+/Stable; S-2¹/Stable) on 6 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

Bulgaria’s long-term ratings at BBB+/Stable are underpinned by: i) successful entry to the Exchange Rate Mechanism II (ERM II) on 10 July 2020, which supports a reduction of external-sector risks, anchored as well by enhancements made to FX-reserve coverage. Entry to ERM II provides a roadmap to the adoption of the euro over the medium run; and ii) reductions in financial-system risk and significant reforms made in the area of banking-sector governance, underscored by successful entry to the EU’s Banking Union. In addition, the country’s low level of government debt, prudent policy framework of recent years and a determined commitment to reform are credit strengths. Challenges relate to: i) the economy’s vulnerability to shocks as a small, open economy – including recognising moderate economic and fiscal deterioration that has been experienced in the Covid-19 crisis; ii) elevated non-performing loans above the EU average and restrictions on the Bulgarian National Bank in serving as the lender of last resort to banks; and iii) institutional and demographic weaknesses. In addition, forthcoming parliamentary and presidential elections present uncertainties at this stage in regard to the post-election policy framework.

For the updated scorecards accompanying this review, click here.

1. The short-term rating was corrected on 12 January 2021 to the level of S-2.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Ratings Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Dennis Shen, Director.

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