Rating agency S&P upgraded Bulgaria's long-term sovereign credit rating from “BBB“ to “BBB+“, citing the country's formal approval to join the eurozone on January 1, 2026.
On July 8, European Union finance ministers approved Bulgaria's application to join the eurozone, making the country the 21st member of the monetary union.
Bulgaria's transition from the lev to the euro comes almost 19 years after the country joined the EU.
“Bulgaria will benefit from the European Central Bank's sound monetary policy, as well as access to the eurozone's capital markets,“ S&P said in a statement announcing the upgrade, leaving the outlook for the country stable.
Still, S&P noted possible challenges, warning that the ECB's policies are likely to be in line with those of the larger members of the monetary union – like Germany and France, which have the largest economies – rather than smaller countries like Bulgaria, which remains the poorest in the EU.
The ratings agency said Bulgaria's robust service sectors, especially in tourism and IT, have helped mitigate the effects of an economy that still spends more on importing goods and services than it earns from exports.
On January 1, 2025 Bulgaria became a full member of the passport-free Schengen area, and S&P expects Schengen and eurozone membership to support trade and international tourism.
The country continues to face long-term challenges related to an aging and shrinking population, as well as infrastructure deficiencies that prevent it from realizing its full potential, the agency noted.
S&P warned that it could downgrade the ratings if Bulgaria's public deficit increases more than expected, especially if fiscal policy becomes too liberal after joining the eurozone or if domestic political instability leads to excessive government spending.