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Fitch Ratings Affirms Bulgaria’s Ratings at 'BBB', Revises Outlook to Stable

27.04.2020

The international rating agency Fitch Ratings has affirmed Bulgaria’s rating at 'BBB’ and has revised the outlook on Bulgaria's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Positive.

The rating agency has sharply revised down its real GDP growth forecast for Bulgaria to -5.1% in 2020 from +3.2%, reflecting the impact of an ongoing lockdown in response to the COVID-19 pandemic on economic activity. Growth is set to rebound in 2021 to 4.2%, as consumption and investment record strong growth. Driven by strong domestic demand, the contribution of net exports to growth will remain small (0.1pp) in 2020.

Fitch Ratings expects Bulgaria's budgetary performance to deteriorate sharply in 2020 given the expected economic contraction and ongoing fiscal easing in response to the COVID-19 pandemic. The government has planned considerable funds for supporting the economy, including healthcare and wage support measures.

Given the higher funding needs, the rating agency expects that Bulgaria's government debt ratio is likely to increase in 2020 by 8.1pps compared to 2019. At the same time Fitch ratings expects that Bulgaria’s track record of prudent fiscal policy with sustainable debt management will continue.      

The factors that could lead to positive rating action/upgrade are progress toward eurozone accession, an improvement in economic growth potential, steady improvement in external and fiscal balance sheets. The factors that could lead to negative rating action/downgrade are a prolonged rise in public debt driven by fiscal easing or the materialisation of contingent liabilities on the sovereign's balance sheet and re-emergence of external imbalances and/or deterioration of external competitiveness.

You can read the full text of the Fitch Ratings press release here.

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