Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Republic of Bulgaria (long-term local- and foreign-currency issuer and senior unsecured debt ratings: A-/Stable; short-term local- and foreign-currency issuer ratings: S-1/Stable) on 2 December 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

Bulgaria’s long-term A-/Stable ratings are underpinned by the following credit strengths: i) the country’s upcoming accession to the euro area, with multiple, significant credit positive implications resulting from the use of a global reserve currency; ii) the sovereign’s low level of government debt and a track record of prudent budgetary policy; and iii) robust medium-term growth prospects, underpinned by sizeable EU fund allocations and the positive effects of euro adoption.

Conversely, credit challenges associate with: i) institutional weaknesses and recently repeated instances of political instability; ii) moderate income levels and exposure to external shocks, given the Bulgarian economy’s small size and openness; and iii) unfavourable demographic trends and persistent labour shortages, weighing on the long-term macro-fiscal outlook.

The Bulgarian economy is expected to continue growing robustly over the medium-term, with real growth expected to reach 3.3% in 2025 and 3.2% in 2026, after 3.4% in 2024. The acceleration in the absorption of Recovery and Resilience Facility (RRF) funds has supported a pick-up in investment, while private demand remains dynamic, benefiting from healthy income growth. Looking ahead, investments are expected to continue driving the growth momentum, as public investment remains strong ahead of the conclusion of the RRF and as private demand benefits from the country’s entry into the euro area.

After remaining broadly stable this year at 3.0% of GDP, the general government deficit is forecast to narrow slightly to 2.8% of GDP next year. In 2027, Scope expects the fiscal deficit to increase temporarily to around 4% of GDP, driven by expected defence-related capital investment, before declining to 3.0% in subsequent years. Expenditure growth remains high, driven by pressures on social transfers, public sector wages, and growing allocations to military spending. Scope notes that Bulgaria benefits from flexibility under the EU fiscal framework following the activation of the national escape clause, which allows EU member states to deviate temporarily from the 3%-Maastricht threshold for additional defence expenditure. Importantly, the medium-term fiscal outlook is impacted by a degree of uncertainty, following authorities’ decision to suspend the 2026 budget bill amidst high social discontent.

The current minority government, supported by a three-party parliamentary coalition comprising centre-left and right wing parties, needs the support of other small parties to pass legislation. The present legislative landscape is unfavourable to fiscal consolidation but also to political stability, especially once the euro-area accession process is complete. Acknowledging this uncertainty, currently Scope expects the public debt-to-GDP ratio to remain on a steady rising trajectory over coming years, rising from 23.8% at end-2024 to around 28% by year-end 2025 – notably driven by a EUR 2bn (around 1.8% of GDP) capital injection into the Bulgarian Development Bank, before growing to around 35% by year-end 2030, driven by sustained primary deficits. Still, despite the steady increase, public debt should remain amongst the lowest in the European Union.

The Stable Outlook on the ratings represents the consideration that risks for the ratings are balanced over the next 12 to 18 months.

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. Sustained economic growth and income convergence continued through reform implementation and investment;
    
2. Progress in addressing institutional challenges, including the rule of law and corruption.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Institutional risks or political instability increases, raising governance concerns and/or challenging European fund inflows;
    
2. The fiscal outlook weakens, resulting in larger-than-expected fiscal deficits and continued rising government debt;
    
3. The economic outlook weakens, for example, due to a domestic or external economic shock, lowering economic growth and/or the country’s medium-term growth potential.

The methodology applicable for the reviewed ratings and rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Brian Marly, Senior Analyst

© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.