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Bulgaria Ratings Affirmed With Stable Outlook

Standard & Poor's Ratings Services said it has affirmed its 'BBB+' long-term and 'A-2' short-term sovereign credit ratings on the Republic of Bulgaria with a stable outlook.

The ratings agency said the ratings on Bulgaria reflect the government's strong track record of appropriate fiscal policy and rapidly declining gross debt, solid growth prospects in the medium term, a relatively strong external balance sheet and the country's E.U. membership.

However, S&P said these strengths are somewhat offset by a large current account deficit coupled with high inflationary pressures, due among other things to wage pressures, indicating an overheating economy.

S&P also said it expects firm policy support to the Currency Board Arrangement (CBA) to be maintained in the wake of high external imbalances and rising wage and inflationary pressures, with the 2008 budgetary surplus forecast at above 3 percent of GDP.

It also expects Bulgaria's high current account deficit, at around 22 percent of GDP in 2007, to decline slightly in 2008 due to a decline in consumption and investment, in turn caused by gradually declining credit growth and a weaker FDI performance.