Fitch Affirms Bulgaria's BBB- Rating

Fitch ratings has announced it affirms Bulgaria's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at BBB-.

Outlook is confirmed as Stable.

The Country Ceiling has been affirmed at 'BBB+' and the Short-Term Foreign and Local Currency IDRs at 'F3', according to a Fitch statement published Friday.

Average GDP growth in 2017-2018 will be 2.8%, up from the previous forecast of 2.4%, Fitch assesses.

Real GDP growth for 2016 is expected at 3.4%, above the "BBB" median of 3.1%.

Sound public finances and "favourable and improving external finances" support the ratings, but "a pattern of unstable governments cloud policy outlook," the agency says.

"Fitch does not envision any significant delay in implementing the 2017 fiscal budget. However, budget revisions by a new government could occur post-election. Meanwhile, with the draft election code submitted back to parliament for further discussion, after a national referendum on the bill failed to attract sufficient support, it remains unclear whether changes to Bulgaria's electoral system will be in place in the near term."

"Bulgaria is characterised by high GDP volatility and faces structural challenges to achieving a higher and more sustainable rate of potential growth in the medium term."

Factors that could lead to an upward rating action include "stronger potential GDP growth and progressive convergence towards peer income levels; sustained improvement in external finances; credible fiscal consolidation that supports stability in the public debt burden."

Main risk factors are "materialization of contingent liabilities on the sovereign's balance sheet from state-owned enterprises and/or banking sector" and "higher fiscal deficits that result in a rapid deterioration of the public debt trajectory."

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