Bulgaria New Elections Raise Economic Uncertainty

Political uncertainty has increased in Bulgaria after the collapse of the four party coalition government under the leader of center – right ‘We Continue the Change’ (PP) party Prime Minister Kiril Petkov. Bulgaria is now heading to new elections, following PP's failed attempt to garner support in parliament to form a coalition government. The four party coalition government collapsed in June after losing a no-confidence vote amid disagreements over budget spending and over a plan to lift Bulgaria’s veto on opening EU accession talks with North Macedonia. Centre-right GERB and socialist BSP parties which came second and third in the November 2021 election, returned the mandate to form a new government bringing Bulgaria to its fourth general election since April 2021, scheduled for 2 October.

Key Highlights

• Bulgaria is now heading to new elections, the fourth general election since April 2021, scheduled for 2 October.
• In DBRS Morningstar's view the renewed uncertainly could have a negative impact on the progress of reform legislation and investments under the NGEU, that could result in delays in the absorption of EU funds, therefore, posing a downside risk to the outlook.
• The new elections come in a period of increased uncertainty over Bulgaria's economic outlook. The implications of the conflict in Ukraine have increased the downside risks for the Bulgarian economy.

“The outcome of the next elections and the timing of the formation of the new government with a clear mandate, will be crucial for the continuation of the reform agenda that paves the way for the euro adoption,” said Spyridoula Tzima, Assistant Vice President of the Sovereign Group at DBRS Morningstar. “DBRS Morningstar notes that continued political standstill could lead to further delays in the absorption of EU funds and in the implementation of reforms necessary for the euro accession process and for raising Bulgaria's growth potential.”