Scope Ratings has completed its latest review of Bulgaria and confirmed the country's long-term credit rating at A- with a stable outlook, alongside short-term ratings of S-1/Stable. The agency highlights several factors that continue to support Bulgaria's position, most notably the forthcoming entry into the euro area, which is expected to bring significant advantages through the adoption of a global reserve currency. Additional strengths include Bulgaria's comparatively low public debt, a long-standing commitment to conservative fiscal management, and solid medium-term growth prospects backed by substantial EU funding and the expected boost from euro adoption.

At the same time, the agency outlines several persistent challenges. These include institutional weaknesses and recurring political instability, moderate income levels compared to EU peers, and the economy's vulnerability to external shocks stemming from its small and highly open structure. Demographic pressures and ongoing labour shortages also remain structural concerns that weigh on long-term growth and fiscal sustainability.

Scope's forecast points to continued robust economic performance. After an estimated 3.4 percent expansion in 2024, growth is projected to reach 3.3 percent in 2025 and 3.2 percent in 2026. The stronger inflow and utilisation of Recovery and Resilience Facility funds have already stimulated investment activity, while household demand continues to benefit from rising incomes. Over the next years, investment is expected to remain the main growth driver, strengthened by ongoing public projects and rising private sector activity as the country transitions to the euro.

On the fiscal side, the general government deficit is expected to remain close to 3 percent of GDP this year before edging down to 2.8 percent in 2026. The agency anticipates a temporary widening of the deficit to around 4 percent in 2027, linked to increased defence-related capital expenditure, after which it should return to roughly 3 percent. Spending pressures remain significant, driven by higher social transfers, growing public wage costs and rising defence allocations. Scope also points out that Bulgaria currently benefits from flexibility within the EU's fiscal rules due to the activation of the national escape clause, which allows temporary deviations from the Maastricht deficit ceiling to accommodate military spending. However, the suspension of the 2026 budget bill amid heightened public discontent adds an element of uncertainty to the medium-term fiscal framework.

Despite expectations of rising primary deficits, Scope projects that Bulgaria's debt-to-GDP ratio will move upward only gradually, from 23.8 percent at the end of 2024 to around 28 percent in 2025. This includes an estimated EUR 2 billion capital increase for the Bulgarian Development Bank, equal to roughly 1.8 percent of GDP. By 2030, public debt is projected to approach 35 percent of GDP, a level that would still place Bulgaria among the least-indebted EU members.

The stable outlook reflects the agency's view that upward and downward risks to the rating remain broadly balanced over the next year to year and a half. An upgrade could come if Bulgaria achieves steady economic expansion, faster income convergence with the EU, and progress in institutional reforms, including improvements to the rule of law and anti-corruption efforts. In contrast, a downgrade would be considered if political or institutional instability worsens, if fiscal discipline weakens leading to larger deficits and faster debt accumulation, or if economic growth is undermined by domestic or external shocks.