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Fitch affirms Bulgaria at ‘BBB’ with positive outlook

Fitch Ratings has re-affirmed Bulgaria’s sovereign long-term foreign and local currency Issuer Default Ratings (IDRs) at "BBB", with a positive outlook, according to the Sofia Globe.

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The agency said that the country’s ratings were based on “strong external and fiscal sheets and credible policy framework, underpinned by EU membership and gradual progress towards euro membership”, but were “constrained by slightly lower income levels compared with the current ‘BBB’ median and unfavorable demographics,” Sofia Globe said on February 20.

Fitch forecast Bulgaria’s average real gross domestic product growth at 3.3% in 2020-2021, noting that “weakness in the external environment, and particularly in the eurozone, has not yet significantly affected” the country.

But the agency cautioned that “ongoing external uncertainty and a projected recovery in imports” would likely lead to “sharper slowdown in headline growth” in the coming quarters.

On Bulgaria’s formal application to join the euro waiting room, the Exchange Rate Mechanism (ERM2), Fitch said that “increased public debate about euro adoption and the mechanics surrounding the leva peg under ERM2” has raised the risk of delays.

“However, Fitch believes that both the Bulgarian and European authorities remain committed to finalizing the process, with a likely positive final decision in 2H 2020,” Sofia Globe added.