The international rating agency Fitch has reaffirmed Bulgaria’s long-term credit rating at BBB with a positive outlook. According to a statement published on Fitch’s website, the positive perspective reflects the country’s potential accession to the euro area.
Fitch’s assessment is based on Bulgaria’s strong external and fiscal balance sheets, which compare favorably with other countries holding the same rating. The agency also highlighted the country’s sound political framework, underpinned by European Union membership and the long-standing currency board arrangement. However, these strengths are balanced by structural challenges, such as low labor productivity and negative demographic trends, which weigh on long-term growth and fiscal sustainability.
The positive outlook is driven by Bulgaria’s progress toward joining the euro area. Fitch cited the request for exceptional convergence reports submitted in February and noted that the country had met all nominal Maastricht criteria, including price stability. The European Central Bank is expected to publish its evaluation in early June. If favorable, Bulgaria could adopt the euro as early as January 2026. The agency does not anticipate major hurdles in the approval process, pointing to strong EU-level political support and reaffirming that euro adoption would be credit-positive.
Fitch revised its 2025 economic growth forecast for Bulgaria upwards to 3.1%, up from the previous estimate of 2.5% in October 2024. This revision reflects improved domestic political conditions and a stronger-than-expected pass-through effect to the economy. Robust nominal wage growth is projected to continue supporting household consumption. While the agency remains cautious about the pace and capacity for reform, it expects increased inflows of EU funds to bolster investment. For 2026, GDP growth is forecast at 2.8%, although some risks remain linked to Bulgaria’s euro accession and broader global economic uncertainties.
Inflation is expected to rise, with the harmonized index of consumer prices (HICP) forecast to average 3.9% in 2025, up from 2.6% in 2024. The increase follows a temporary dip to 1.5% in September 2024, attributed to administrative price adjustments and the expiration of reduced VAT rates. Fitch expects inflation to moderate to 3% in 2026, but notes that euro adoption may align Bulgarian prices more closely with the EU average in the medium term.
Fitch estimates the budget deficit widened to 2.8% of GDP in 2024, up from 2% in 2023, due to increased public sector wages and social spending. The deficit is projected to slightly narrow to 2.7% in 2025, factoring in additional wage hikes, military procurement worth 0.5% of GDP and some revenue-enhancing measures. In 2026, the deficit is expected to decline further to 2.4%, still above the government’s 2.2% target due to ongoing defense spending and reduced EU fund disbursements.
Fitch outlined key factors that could lead to an upgrade in Bulgaria’s rating, including a confirmed fulfillment of the convergence criteria, clearer timing for euro adoption, and stronger growth prospects. Conversely, setbacks in the euro accession process due to political instability or failure to meet the criteria, as well as weaker economic outlooks, could result in downward pressure on the rating. (Novinite)