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Moody's rates Bulgarian economy “resilient”

In its annual report on Bulgaria, global credit rating Moody's Investors Service praised the country's improved resiliency in the decade since the economic crisis in 1997.

“The economy has stabilized, growth has been strong and output has diversified. The ratings are underpinned by a prudent fiscal policy and low and declining debt levels,” the report's author, Moody's Vice President Kenneth Orchard, said in a statement.

The agency rates Bulgaria at investment grade 'Baa3', with a positive outlook, with the yearly report not considered a rating action.

Moody's noted that the ratings reflect positive developments, including joining the EU in January 2007, but noted also a number of concerns, in particular the existence of a currency board arrangement alongside a large current account deficit and rapid growth in private-sector external debt.

“The higher current account deficit and rapid domestic credit growth suggest that vulnerability to destabilizing external shocks has increased over the past year,” the ratings agency said. Bulgaria's currency board, in which the lev is pegged to the euro, is a concern as it limits the central bank's policy flexibility.

Although the global credit crunch caused by the US subprime crisis has also increased the risk of an external shock causing instability over the next 12-18 months, Moody's analyst noted that “the government and banking system are sufficiently strong to withstand a significant economic or financial shock at the country's current rating level.”

Moody's annual report on Bulgaria comes just days after Fitch Ratings revised the outlook on Bulgaria's long-term credit ratings, 'BBB' in foreign and 'BBB+' in local currency, to negative from stable over growing concerns of worsening macroeconomic imbalances, leaving open the possibility that it would cut Bulgaria's credit rating in the next 12 months.

Moody's credit rating remains the most conservative among the three global rating agencies, while Standard&Poor's re-affirmed in November 2007 its 'BBB+' long-term rating with stable outlook. (Sofiaecho)