Moody's Investors Service announced Thursday that it has changed the outlook on the Bulgarian government's Baa3 ratings to positive from stable. The rating action restores the positive outlook that was in place prior to the financial crisis in September 2008.

This is also the first positive rating action on an EU sovereign since July 2008, says the agency.

"The Bulgarian government's finances were relatively resilient through the 2008-09 financial crisis," says Kenneth Orchard, Vice-President/Senior Credit Officer in Moody's Sovereign Risk Group. "Despite a deep recession, Bulgaria will have very low budget deficits by global standards in 2009 and 2010, keeping government debt ratios low and stable."

Moody's expect the recession to end in mid-2010 but warns that the problems in Greece is likely to dampen the recovery this year as some 9 per cent of Bulgarian exports go to Greece, and Greek companies are major investors in the country, particularly the banking sector.

Economic growth should resume in 2011-12 supported by significant EU funds and FDI. Moody's recognizes that Bulgaria continues to face risks from its external finances, including a large current account deficit and very high external debt.

In a related action, the outlooks on the A1 foreign currency bond ceiling and Baa3 foreign currency deposit ceiling were also moved to positive from stable. The foreign currency bond and deposit ceilings are the highest possible ratings that may be assigned to Bulgarian foreign currency bonds and deposits, respectively.

In a statement for the press after the announcement of the Moody's rating action, Finance Minister Simeon Djankov comments that it is yet another recognition by international investors and analysts that Bulgaria has the EU's most stable fiscal policy. "There are several difficult months ahead of us but we have already proven capable of handling tough situations and we can get the country out of the crisis," says Djankov.

Source: BTA