Moody’s has released its latest assessment of Bulgaria’s economic and institutional outlook, presenting a moderately positive view while highlighting ongoing challenges. The agency points to Bulgaria’s European Union membership and the planned adoption of the euro on January 1, 2026, as key factors supporting the country’s governance and institutional stability. Yet, corruption remains a significant hurdle that continues to undermine progress.
The review notes structural weaknesses such as Bulgaria’s relatively small economy, aging population, and underdeveloped infrastructure. Despite these challenges, the country benefits from comparatively high income levels, which help to offset some economic limitations.
The government led by Prime Minister Rosen Zhelyazkov, which took office in January following a period marked by caretaker administrations and two early elections, reinvigorated efforts to advance the National Recovery and Resilience Plan (NRRP). Nevertheless, Moody’s cautions that Bulgaria is still lagging behind most EU nations in fully implementing the plan, with the August 2026 deadline looming. Successfully accessing the full available grants remains uncertain.
Economic growth is expected to continue, buoyed by robust private consumption. However, weaker external demand will likely dampen momentum. Positive developments such as Bulgaria’s anticipated full entry into the Schengen Area in early 2025 and the eurozone in 2026 could enhance consumption, investment, and exports. Moody’s projects GDP growth to moderate slightly to 2.5% in 2025 and 2.6% in 2026.
Fiscal pressures are expected to mount due to increased defense spending and investments in the energy sector. The agency foresees moderate budget deficits around 3% of GDP over the medium term. Correspondingly, government debt is forecast to rise from 24.1% of GDP in 2024 to 25.9% in 2025 and further to 27.7% in 2026.
Earlier this year, Moody’s affirmed Bulgaria’s long-term and short-term credit ratings at Baa1 with a stable outlook, but at that time predicted slightly higher debt ratios – 27% of GDP in 2025 and about 29% in 2026 – compared to current estimates.
Experts commenting on Moody’s report suggest that Bulgaria could outperform these projections if institutional reforms progress and governance improves. Conversely, fiscal discipline may weaken post-euro adoption, especially if the government fails to maintain deficits at or below the 3% threshold mandated by eurozone convergence criteria.
It is important to note that Moody’s latest assessment does not change Bulgaria’s current credit rating and is not an indicator of an imminent revision.
In parallel, other rating agencies have recently upgraded Bulgaria’s credit status. Standard & Poor’s and Fitch both raised the country’s long-term foreign currency rating to BBB+ with a stable outlook-the highest level within the investment-grade category. Scope Ratings also elevated Bulgaria’s long-term local and foreign currency ratings to A- from BBB+. (Novinite)