The international rating agency “Fitch” (Fitch Ratings) confirmed the long-term credit rating of Bulgaria in foreign and local currency BBB with a positive outlook.

The rating is supported by the strong external and fiscal position of the country, the reliable political framework of membership in the European Union and the long-term functioning of the currency board regime, said the Ministry of Finance.

The positive outlook reflects plans for Eurozone membership.

Despite the series of early parliamentary elections, the rating agency believes that the key political parties remain committed to the adoption of the euro, legislative amendments in this direction should be adopted after the stabilization of the political environment.

Fitch Ratings forecast a slowdown in annual average harmonized inflation to 9.6% in 2023 from 13% in 2022.

The agency also forecast GDP growth to slow this year to 1.3% from 3.4% in 2022, before accelerating to 2.6% in 2024.

According to Fitch Ratings, this year’s fiscal performance is uncertain as the caretaker government works under the provisions of the 2022 budget law. The general government deficit is expected to widen to 3.4% of GDP in 2023 from 2.8% in 2022, which is in line with the current median of “BBB” rated countries. For 2024, the budget deficit is expected to shrink to 2.5% of GDP.

Main factors that could lead to positive actions on the credit rating are: progress towards joining the eurozone, including confidence that Bulgaria meets the membership criteria and the deadline for adopting the euro; improving the growth potential of the economy, for example by introducing structural and management reforms to improve the business environment and/or efficient use of EU funds.

Factors that could lead to negative rating actions are: lack of progress in joining the Eurozone due to continued political instability or failure to meet convergence criteria; lower medium-term growth prospects, caused for example by a significant adverse macroeconomic shock or inflation that has persisted at high levels.