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Standard & Poors Agency Revised Bulgarias Outlook to Positive

Standard & Poors Agency Revised Bulgarias Outlook to PositiveOne of the three leading rating agencies in the world, Standard & Poors Rating Services, revised Bulgarias outlook in terms of foreign and local currency from stable to positive. The agency affirmed the BBB- long-term and the A-3 short-term local currency sovereign credit rating. The revision of the outlook is based on the expected robust economic growth of Bulgaria, as well as on the debt reduction that is proceeding faster than previously expected. At the same time external liquidity has improved, says the credit rating agency. According to the press release of the Standard & Poors, the countrys accession process to the EU goes according to plan 2007 which will stabilize structure reforms. Bulgarias positive outlook is backed by competitiveness and political commitment to follow a reasonable macroeconomic policy. By the end of the decade, the GDP is expected to be about 5% annually, says the agency. Buoyant revenues have led to a general government surplus approaching 1% of GDP. Conservative revenue estimates in the 2005 election-year budget are likely to lead to a balanced budget, notwithstanding politically driven pressures for extra spending, says Standard & Poors. General government debt has fallen fast, and this decline was further accelerated by the weaker U.S. dollar and buy-backs of Brady bonds in 2004 and 2005. Accordingly,the debt ratio will fall further to 30% of GDP in 2005,from 80% as recently as 2000, say analysts. The central bank has more than doubled foreign exchange reserves since 2002, to an estimated $10 billion by year-end 2004, but about one-half of this sum is needed to back the currency board. The current account deficit may be a cause for concern if there is a change in the rise of the FDI (Foreign Direct Investment). Now the current account deficit covers almost the net FDI, of which only a small amount come from privatization. The positive out look corresponds to the expection that prudent fiscal policies will survive the June 2005 general election, irrespective of the composition of the next government, because policy constraints imposed by Bulgaria's currency board are well understood in all the main political camps. The consensus surrounding sound economic policies more than outweighs the volatile political landscape. A successful continuation of the public debt reduction strategy while safeguarding external sustainability will lead to a rise in the rating over the next 12 months. Since the beginning of the governments mandate, Bulgaria rating has risen 15 times according to world rating agencies. In 2004, Standard & Poors, Fitch, Moodys and Japan Credit Rating Agency measured an increase in the rating. It marks the economic prospects and the consistent policy of Simeon Saxe-Coburgs government. On 24 June 2004 Standar&Poors raised the foreign currency rating up to investment class BBB-/A-3 with a stable outlook. This is a signal for investors that Bulgaria enjoys a stable economic growth and is a promising country for their business activity. Within a week, in the beginning of August, the countrys rating was raised by Fitch and Japan Credit Rating Agency. On 4 August, Fitch assessed Bulgarias foreign currency investment rating as BBB, and on 11 August Japan Credit rating Agency gave an evaluation of BBB-/positive outlook in foreign currency. On 17 November 2004, Moodys raised the countrys foreign currency bonds rating from Ba2 to Ba1. Bulgarias rating in foreign currency bank deposits was revised from Ba3 to Ba1. The outlook is positive.

14 February 2005 -

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