Fitch kept Bulgaria's rating unchanged

The international credit rating agency Fitch Ratings has affirmed the country’s long-term foreign currency rating at “BBB+” with a stable outlook. The reason for the lack of an upgrade, which was expected following accession to the eurozone, is that “unstable coalition governments and frequent elections in recent years have slowed progress in implementing reforms.”

According to the Fitch statement cited by the Ministry of Finance, the affirmation of the rating “reflects Bulgaria’s stable external and fiscal position and the reliable policy framework supported by the country’s membership in the EU and the eurozone.”

The rating agency notes that if current growth rates are maintained, per capita income is expected to remain lower than in countries with a similar rating.

The stable outlook reflects Fitch’s expectation that renewed domestic political uncertainty and external geopolitical risks will not hinder Bulgaria’s solid economic growth or lead to the accumulation of macroeconomic, fiscal, or external imbalances. External finances remain a strength of the rating, despite the reported increase in the current account deficit.

Factors that could potentially lead to a downgrade include the accumulation of macroeconomic imbalances or a slowdown in economic growth, for example as a result of adverse political events that would hinder the implementation of reforms; a significant increase in the government debt-to-GDP ratio over the medium term, due, for example, to a more expansionary fiscal policy or weaker economic performance.

A future upgrade of the rating could be expected with sustained improvements in political stability and institutional capacity, which would facilitate the implementation of reforms and the convergence of the country’s structural indicators with those of higher-rated countries. A reduction in macroeconomic imbalances and the achievement of higher economic growth, supported by the implementation of structural reforms or the effective absorption of EU funds, would also have a positive effect on the rating.

Translated with DeepL.