S&P Global Ratings suggests that Bulgaria’s potential entry into the eurozone and the outcome of its recent general election could stimulate investment-led growth. However, the analysis indicates that weak financial management at the municipal level, particularly in long-term strategic planning, constitutes the primary barrier to more robust local investment. While low debt levels support the country’s credit ratings, this low debt burden is attributed to a persistent lack of regional investment, which dampens overall economic expansion.
As of the end of 2024, Bulgarian local and regional government (LRG) debt, measured as a percentage of GDP, stands at 0.8%, a figure significantly lower than peers in Central and Eastern Europe, such as Poland and Romania. Furthermore, the outstanding stock of debt securities relative to total LRG debt remains low at 1.6% in 2024. Eurozone membership is expected to enhance Bulgarian issuers’ access to euro-denominated commercial debt markets, and greater central government stability should facilitate more predictable budget transfers to municipalities.
Currently, state transfers account for nearly 80% of local government operating revenues, and annual debt repayments are capped at 15% of the average own revenues plus equalizing subsidies over the previous three years. Despite these favorable macroeconomic and political developments, the level of general government investment spending has consistently trailed regional peers, including Hungary and the Czech Republic, over the past decade. Compounding this, negative demographic trends and regional reliance on fossil fuels further
Topics: #ratings #municipal #global
