JCR has affirmed its BBB rating on the foreign currency long-term senior debts and its BBB+ rating on the local currency long-term senior debts of the Republic of Bulgaria.

The ratings are primarily based on the country's prudent fiscal policy that has led up to a substantial reduction of the government debt and accumulation of large fiscal reserves, its maintenance of the solid currency board arrangement through collaboration between the government and the Bulgarian National Bank (BNB), and its expanded production capacity rendered by massive inflows of EU subsidies and foreign direct investment (FDI).

On the other hand, the ratings remain constrained by the country's sizable foreign debt in the private sector and its industrial transformation still being at a primary stage.

The rating outlook has been revised to stable from negative. The country's external position has been improved through a significant reduction of the current account deficit and a moderate cutback on the short-term external debt. The minority government has sustained the currency board arrangement and has been promoting the fiscal consolidation, judicial reforms and fight against corruption with the cooperation of the right-wing opposition parties.

Furthermore, on top of a robust export growth, the economy is highly likely to continue its recovery to register a growth rate higher than 2% in 2011 on a pickup of domestic demand. This favorable economic development may help the government cut its fiscal deficit to less than 3% of GDP in 2011.