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The outlook for the sovereign rating of Bulgaria
submited on 21.01.2010 in category Political stability | Fiscal affairs | Monetary policy | Macroeconomic developments
Hence, many of the initially skeptical foreign analysts have implicitly admitted their mistakes in determining the real economic and political challenges before the Bulgarian economy amidst a global financial meltdown. Exactly a year ago credit rating agencies were worried by the supposed inability of the Bulgarian economy to respond quickly to changes in exogenous factors.
Two were the main concerns – the stability of the currency board, as foreign currency reserves were decreasing rapidly in the pre-election period, and the current account deficit, which widened substantially. One year later, however, these predictions proved to be wrong. First, the Bulgarian financial system remained sound, as confidence in the currency board reached record-high levels as of end-2009. Second, the current account deficit contracted from 23% of GDP as of end-November 2008 to 8% of GDP a year later. Now the current account deficit is entirely covered by the inflow of foreign direct investment.
Hence, these two issues have never been among the real challenges before economic stability in Bulgaria. But even if they were, the improvement in the most broadly accepted measures of volatility implies that the perceived risk of investments in Bulgaria should decrease in the near future.
submited on 21.01.2010 in category Political stability | Fiscal affairs | Monetary policy | Macroeconomic developments
Hence, many of the initially skeptical foreign analysts have implicitly admitted their mistakes in determining the real economic and political challenges before the Bulgarian economy amidst a global financial meltdown. Exactly a year ago credit rating agencies were worried by the supposed inability of the Bulgarian economy to respond quickly to changes in exogenous factors.
Two were the main concerns – the stability of the currency board, as foreign currency reserves were decreasing rapidly in the pre-election period, and the current account deficit, which widened substantially. One year later, however, these predictions proved to be wrong. First, the Bulgarian financial system remained sound, as confidence in the currency board reached record-high levels as of end-2009. Second, the current account deficit contracted from 23% of GDP as of end-November 2008 to 8% of GDP a year later. Now the current account deficit is entirely covered by the inflow of foreign direct investment.
Hence, these two issues have never been among the real challenges before economic stability in Bulgaria. But even if they were, the improvement in the most broadly accepted measures of volatility implies that the perceived risk of investments in Bulgaria should decrease in the near future.
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