geopolitical risk ratings firm

Bulgaria Update

18-Month: Center-Left Minority 45% (50%)
Five-Year: *Center-Left Coalition 45%


Turmoil Financial Transfer Direct Investment Export Market
18-Month: Moderate A- A A-
Five-Year: Low B+ B+ B

( ) Indicates change in rating.            *  Indicates forecast of a new regime.

Years Real GDP Growth % Inflation % Current Account ($bn)
2008-2012(AVG) 0.7 4.9 -3.53
2013(F) 0.7 1.1 0.85
2014-2018(F) 2.5 4.4 -2.90

Government on Shaky Ground
The survival of Prime Minister Plamen Oresharski’s minority government is growing more doubtful by the day.  The minority regime has survived two attempts to topple it from power by means of a vote of no-confidence, but the government’s ability to fend off opposition attacks will weaken unless Oresharski can find some basis for responding positively to persistent public agitation for institutional reforms.
The government’s supporters in the left-leaning BSP and the ethnic Turkish DPS control exactly one-half of the seats in the 240-member Parliament, while the main opposition GERB, a center-right party headed by former Prime Minister Boyko Borisov, is bent on undermining Oresharski’s administration.  Consequently, the regime’s ability to accomplish much of anything hinges on gaining the support of (or, at the very least, not alienating) the far-right nationalist Ataka, which has gained notoriety for its xenophobic stances on issues such as immigration and foreign investment.
The negative connotations of the government’s dependence on Ataka’s support were confirmed recently by the National Assembly’s decision to endorse a proposal put forward by Ataka to extend (to 2020) a moratorium on land sales to foreign citizens.  The moratorium violates the country’s EU treaty obligations, and if not repealed by 2014, Bulgaria would be subject to reciprocal actions by other EU member states, such as an extension of restrictions on Bulgarian workers’ access to other EU labor markets.
Repeal seems unlikely, given that the law was passed by a margin of 171–38, with 12 abstentions.  Under the circumstances, a negative ruling by the Constitutional Court may provide the only means of preventing a deterioration of relations with the EU that could also imperil significant financial support.
Poll data suggests that an early election could very well produce another inconclusive result.  The political uncertainty is heightened further by an unfavorable near-term economic outlook.  Real GDP growth of less than 1% this year will limit the potential for a significant reduction in unemployment, which is fluctuating around 13%, and is running closer to 25% among workers under the age of 25.  Widespread joblessness is creating both a drain on fiscal resources and aggravating social tensions.

Economic Forecasts for the Three Alternative Regimes


Center-Left Coalition Center-Right Coalition Center-Right Minority
Growth(%) Inflation(%) CACC($bn) Growth(%) Inflation(%) CACC($bn) Growth(%) Inflation(%) CACC($bn)
2013 0.7 1.1 0.85 0.9 1.3 0.75 0.4 1.0 0.95
2014-2018 2.5 4.4 -2.90 3.4 3.5 -1.90 2.7 3.2 -2.60

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