Bulgaria

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile The economic effects of the pandemic appear to have been manageable and we expect solid real growth rates over the medium term. Overall debt levels remain low. Although deficits saw a substantial rise in 2020, which is predicted to be repeated in 2021, it was incurred at a record-low cost. -- Domestic demand will push real GDP growth to almost 4% in 2021, despite several resurgences of the pandemic. -- We expect fiscal deficit will narrow over the next years as the authorities start consolidating from next year. -- In the medium term, EU fund inflows, including from the Next Generation EU (NGEU)

...The economic effects of the pandemic appear to have been manageable in Bulgaria, despite a significant health impact. Domestic demand, particularly private consumption, has recovered strongly and the increased absorption of EU funds will lift the medium- term growth outlook. Under the previous and current EU Multiannual Financing Framework (EU MFF) and the Next Generation EU (NGEU) instrument, we estimate that Bulgaria is eligible for EU grants equivalent to about 40% of 2021 GDP. Sizable support measures during the pandemic led to significant fiscal deficits in 2020, and we forecast similar deficits for 2021. Although some measures will continue into 2022, we expect deficits will narrow from next year, and we note Bulgaria's established record of fiscal prudence under several administrations. Although fiscal loosening has increased public leverage, Bulgaria's net government debt levels remain modest at around 20% of GDP, whereas sovereign funding costs have reduced to record-lows....

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