S&P Global Ratings suggests that Bulgaria’s potential entry into the eurozone and the results of its recent general election could foster stronger investment-led growth. However, the analysis indicates that weak financial management at the municipal level, particularly concerning limited long-term strategic planning, remains the primary obstacle to more active municipal investment. While low debt levels support the country’s current ratings, this stability is noted to stem from a recurring deficit in regional investment, which weighs on overall economic expansion.
As of the end of 2024, local and regional government (LRG) debt as a percentage of national GDP remains low at 0.8%, placing it below peers in Central and Eastern Europe such as Croatia, Romania, and Poland. Furthermore, the outstanding stock of debt securities is exceptionally low at 1.6% of total LRG debt, compared to peers like Poland (7.3%) and Romania (11.6%). Eurozone membership is expected to strengthen Bulgarian issuers’ access to euro-denominated commercial debt markets.
Increased stability at the central government level should also support more predictable budget adoption and timely transfers to municipalities. State transfers currently account for nearly 80% of local government operating revenues, and annual debt repayments are capped at 15% of average own revenues plus equalizing subsidies over the preceding three years. Despite these favorable macroeconomic and political conditions, the level of general government investment spending has consistently lagged regional peers over the last decade.
Compounding these issues are negative demographic trends and the fossil fuel dependency of several regions. Overall, the global outlook for municipal investments remains constrained, according
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