Moody’s Upgrades Outlook for Bulgaria’s Banking Sector to Positive

Sofia, The Gulf Observer: Moody’s Investors Service has revised its outlook for Bulgaria’s banking sector from stable to positive, following the recent affirmation of the country’s credit rating at Baa1.

The global rating agency cited Bulgaria’s strong economic growth, persistently low interest rates, and improving banking portfolio quality as the primary drivers behind the upgrade. Moody’s also highlighted the anticipated entry of Bulgaria into the eurozone in early 2026 as a key factor, noting that integration into the monetary union would eliminate currency risks for banks and enable the Bulgarian National Bank (BNB) to provide liquidity support, thereby reducing financing vulnerabilities.

Despite the positive forecast, Moody’s cautioned about potential cyclical risks, including accelerated mortgage lending and rising property prices. However, the agency acknowledged that regulatory measures implemented by the BNB have been effective in limiting the issuance of high-risk housing loans.

Capital levels across Bulgaria’s banking sector are expected to remain strong, according to Moody’s. Although profitability is forecasted to dip in 2025 due to declining interest rates, it is projected to remain well above the European Union average. The eventual accession to the eurozone is anticipated to further bolster banking sector profits, as banks will be able to invest surplus liquidity currently held at the BNB at zero interest.

The positive outlook reflects growing confidence in the resilience and long-term prospects of Bulgaria’s financial system.