Allianz Trade upgrades Bulgaria's rating to B2

The positive rating action takes into account the reduction in the medium-term risk of delayed payments and bad debts in relation to transactions between companies, Allianz Trade said in a press release presenting data from its third-quarter country risk ratings report.

The company expects the Bulgarian economy to expand by over 2.5% real in 2023-2024. The recession in 2020 was relatively short-lived and was followed by a significant economic upsurge in recent years, according to company analysts.

Several stable macroeconomic indicators formed the basis for the medium-term rating increase, as analyst assessments pointed to the Bulgarian economy having relatively well withstood external shocks over the past four years, including the Covid-19 pandemic and the war in Ukraine.

"Public finances are favourable, with government debt at just 24% of GDP. The current account has recorded small annual deficits since 2021, which were largely covered by net inflows of foreign direct investment. Currency reserves cover about seven months' worth of imports and are more than enough to support the current currency board. Bulgaria is in a good position to join the Eurozone in 2025-2026," Allianz Trade senior economist Manfred Stamer said.

After the end of the third quarter of 2023, Allianz Trade analysts retained the risk ratings unchanged for delayed payments and bad debts in the 18 Bulgarian economic sectors. As many as eleven sectors are considered as presenting sensitive risk for delayed payments, while only the software and IT sector is in the green low-risk zone.

"The improved sovereign rating of Bulgaria is no reason for Bulgarian companies to underestimate the challenges in the dynamic context of
the global economy today, when we also have indications of recession in some markets," Kamelia Popova, manager at Allianz Trade Bulgaria, formerly Euler Hermes, said.

Bulgaria was one out of only six countries which had their ratings increased by Allianz Trade in the third-quarter report. Elsewhere in Southeastern Europe, Slovenia was also upgraded, to A2 from BB2.