04.06.2016

The international credit rating agency Fitch Ratings affirmed Bulgaria's long-term foreign and local currency Issuer Default Ratings (IDR) at "BBB-" and "BBB", respectively, outlook stable. It also affirmed the country ceiling at "BBB+" and the short-term foreign currency IDR at "F3".

The ratings reflect the stronger external economic position and the more favourable fiscal framework of Bulgaria as compared to the countries having "BBB" ratings. On the other hand, the agency notes that the country faces structural challenges to boost its long-term potential growth rate and improve GDP per capita to levels in line with similar and higher rated peers.

Fitch forecasts that GDP will grow by 2.1% in 2016, after real GDP growth of 3.0% in 2015. The slower rate of growth reflects its forecast for a contraction in investment this year, consistent with the ending of the 2007-2013 EU funding cycle. At the same time the agency forecasts that household consumption will pick up. Employment growth and higher levels of disposable income are expected to boost private consumption growth to 2.0% in 2016 from 0.8% in 2015. Forecasts are for net exports to remain the key driver of GDP growth. 

The agency points out that the main factors that could trigger positive rating action include stronger GDP growth and progressive convergence towards average EU income levels, sustained improvement in external finances, credible fiscal consolidation that supports the long-term sustainability of public debt dynamics and sustained improvement in institutional governance.

According to the agency the main factors that could trigger negative rating action include potential emergence of instability in the banking sector. It may lead to pressure on government fiscal finances and economic growth as well a to higher fiscal deficits than projected that could threaten the long-term sustainability of public finances.

You can find the press release of the rating agency here.