Bulgaria has come under the microscope of Moody’s for a possible sovereign rating upgrade thanks to its robust fiscal performance and more action should be expected by other rating agencies in the medium term, according to the latest report on Bulgaria issued by Eurobank EFG’s Economic Research Unit. In Bulgaria the Group is represented by Postbank. The research states that the continued industrial and exports recovery predisposes for a robust GDP reading in the first quarter of 2011 and Eurobank EFG Group has upgraded its GDP forcast for 2011 to 3.2% from 2.5% previously.
The report notes that the Bulgarian economy has fared much better in terms of output contraction, fiscal metrics and external metrics compared to other ‘Baa’ rated countries by Moody’s like Latvia, Lithuania, Croatia and Hungary. Coupled with the economic environment improvement and the improving macroeconomic fundamentals Eurobank EFG Group’s research team notes this should lead other rating agencies to reassess their stance soon.
According the financial group’s report the recent high frequency indicators in the first two months of the year point to a continuation of the exports led recovery. Exports expanded by an astonishing 46.5% yoy in February in addition to the 72.5% yoy in January. Industrial production accelerated to 15.2% yoy in February after an increase of 10.1% yoy in January while industrial sales expanded by 32% yoy and 35.9% yoy in February and January respectively. In addition, early signals of recovery from the domestic demand side have shown up. The continued industrial and exports recovery predisposes for a positive GDP reading in the first quarter of 2011 despite lingering downside concerns for domestic demand. These developments in combination with the Group’s global outlook forecast assumptions, has led it to upgrade its GDP forecast to 3.2%. Downside risks remain inflation weak domestic credit activity, high refinancing needs of private-sector external debt and unemployment rate.