Bulgaria’s Credit Rating Cut to Junk by S&P on Banking Weakness

Bulgaria’s Credit Rating Cut to Junk by S&P on Banking Weakness

Bulgaria’s sovereign credit rating was cut to junk by Standard & Poor’s, which cited weakness in the banking system that’s prompted government support.

The rating was lowered to BB+ from BBB-, putting the nation on par with Indonesia and French Polynesia. S&P assigned a stable outlook. Fitch Ratings and Moody’s Investors Service both rate Bulgaria at investment grade.

“Persistent deflation and an overhang of impaired private sector debt represent future risks to growth, financial stability, and budgetary outcomes,” S&P said in a statement from London. “The stable outlook balances the risks we see from potential vulnerabilities mounting in the financial sector against still-low levels of government indebtedness.”

The economy of the European Union’s poorest country by per-capita output is under pressure after political turmoil caused five government changes in two years and Corporate Commercial Bank AD, the fourth-largest lender, failed in June. Economic growth will slow to 0.8 percent in 2015 from an estimated 1.5 percent this year on low consumption and investment, Finance Minister Vladislav Goranov said Dec. 8.