02.12.2017

Fitch Ratings has upgraded Bulgaria's Long-term foreign and local currency Issuer Default Rating (IDR) to 'BBB' from 'BBB-'. The Outlook on both IDRs is Stable. The upgrade reflects Bulgaria’s external finance metrics which are estimated to outperform the majority of its 'BBB' peers. According to Fitch, the country’s net external creditor position strengthened to 8.6% of GDP in 2016 and it is forecast to improve further. Current account surpluses averaging 3.4% of GDP are also forecast for 2017-2019, supported by gains in export competitiveness and a diversifying export base. The second key rating driver is related to the strong Bulgaria’s sovereign external buffer. Foreign reserves represent 49.7% of GDP, while the external liquidity ratio climbed up to 215% at end-2016, thus providing more than adequate liquidity support for Bulgaria’s long-standing and credible currency board regime.

The main factors that could, individually or collectively, lead to positive rating action are stronger medium-term GDP growth potential and progressive convergence towards income levels of higher rated peers. The factors that could, individually or collectively, lead to negative rating action are re-emergence of external imbalances, for example from prolonged widening of the current account deficit and/or deterioration of external competiveness. Risks from public finances might occur in case of higher fiscal deficits that result in deterioration of the public debt trajectory and materialisation of contingent liabilities on the sovereign’s balance sheet coming from state-owned enterprises.

You can find the full text of the press release here.